Tesco Launches Credit Card Aimed at New Borrowers

tesco clubcard and clubcard vouchersTesco’s banking division has launched a new credit card aimed at first-time credit users interested in building their ratings. The card, which has an APR of 28.9%, is aimed at the hundreds of thousands of people with poor credit ratings who do not qualify for mainstream credit cards. Called the Foundation Clubcard, the new Tesco Bank credit card gives borrowers who would not otherwise be able to access credit a chance at building their credit histories while earning Clubcard points. Applicants must earn at least £5,000 per year in order to qualify for the card, which was an adjustable credit limit. In order to encourage responsible borrowing, Tesco Bank allows the card’s credit limit to be set at just £250. A Tesco Bank representative claims that the card could help first-time customers interested in improving their credit scores who did not have access to other credit cards. The card will compete with other first-time credit cards offered by Barclaycard and Capital One. Barclaycard offers a card called Initial with a 34.9% representative APR; Capital One’s Classic Preferred card has a 28.9% APR – the same as the new card offered by Tesco. The new card has been praised and criticised by credit card watchdogs. Andrew Hagger, of MoneyComms, claims that Tesco Bank is “giving customers an excellent opportunity to gradually improve their credit rating.” Online commenters have called the card an extortion attempt and usury aimed at vulnerable borrowers. Supporters of the card have also noted that it could result in a drop in the number of people relying on payday lenders. By giving access to first-time borrowers who have few other options, Tesco could build a “path to credit” for people that could end up indebted to high-interest payday lending companies.

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Just Ask: The Secrets to Reclaiming Credit Card Charges

23-AprilWith even a single late payment significantly increasing your credit card bill, taking some steps to reclaim your credit card charges is a great idea. A recent guide in This Is Money covered the basics of reclaiming credit card charges and fees using a basic knowledge of the law and some friendly customer service outreach.

If you’ve been hit with hefty credit card charges before, these simple tips can make it far easier to reclaim them and reduce your monthly bill. Start by understanding the basics of the rules that credit card providers are required to follow. After a ruling by the Office of Fair Trading, banks can only charge a suitable amount to customers.

This means that fees for late payments can’t be arbitrarily decided by the bank; they need to actually reflect the costs incurred by your card issuer. Due to the 2006 rule, most banks lowered their average credit card charge from a staggering £35 down to just £12 per instance.

The key to reclaiming charges is spotting them early. Most banks include charges in the list of transactions on your monthly statement instead of listing them in another section. Check your statement in detail and follow up on charges that you think are not justified.

Reach out to your credit card company – not your bank – and ask for leniency on the charge. If you have a clean credit history and no past charges, most card companies will reverse the charge with few questions asked. Generally, credit card companies are more lenient when it comes to reversing charges and fees than banks.

While most charges can be reversed with a quick phone call, writing a letter to your credit card company is a good way to get large charges reversed. Remember that the competition between credit card companies is immense, and many companies will happily reverse a charge in order to retain your business.

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Elderly Targeted in Credit Card Phone Scam

21-AprilA new credit card scam is spreading across the country, targeting the elderly using a simple but dangerous phone-based deception routine. Police in Lincolnshire warned locals to be on the lookout for phone scammers calling to request credit card details after an “account breach”.

The scam uses a format that’s familiar to those familiar with phone scams. Victims report receiving calls form scammers pretending to represent either a bank or the local police force. The caller claims that the victim’s credit card information has been stolen, but that the thief has already been arrested.

In order to have the card destroyed, victims are asked to confirm their credit card number and provide a PIN or expiry date. The scammers then promise to pick up the card using a courier. Two residents of Stamford fell victim to scammers using the phone-based routine, according to Lincolnshire police.

The scammers reportedly disguised themselves as fake couriers in order to collect the card of a 71-year-old man living in Stamford. By the time he reported the crime to police, his account had been drained of £900. An 81-year-old local was called by the scammers but refused to hand over his card details, instead calling the police.

Credit card scams have been on the rise over the past year, both in the UK and in a variety of other countries. In addition to confidence scams aimed at the elderly, the number of online credit card scams has risen, with hackers stealing the credit card information of online shoppers in a series of high-profile digital security breaches.

Police have warned people targeted by the scammers to report the calls and contact their banks immediately. Senior inspector Mike Burnett reminds people to report all calls requesting credit card information. He says: “A genuine employee of your bank will never ask you for this information over the phone, nor will they send someone to collect your cards.”

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‘Credit Hackers’ Trade Risk for Lucrative Rewards

14-AprilCould using your credit card more often actually be a good financial idea? According to the online community of credit hackers, it could. ‘Credit hackers’, who are known as ‘card churners’ among credit card issuers, believe in spending more on credit for the sole purpose of racking up rewards.

The churning practice has earned some of its most dedicated followers rewards that far exceed the typical year-end bottle or wine or airline rewards card. Hardworking card churners claim that their activities – which often involve using upwards of 10 credit cards at once – earn them thousands of dollars in bonuses ever year.

In a recent article on Lifehacker.com, some of the web’s most focused credit hackers shared their strategies. They targeted specific credit cards that offered the greatest rewards at the lowest cost. Their favourite: the Sapphire Preferred card, issued by American retail bank Chase, which offers 40,000 bonus points in just three months.

The catch: users need to spend at least $3,000 within the first three months of card ownership. Credit hackers frequently sign up to the same card several times to get the sign-up bonuses more than once, often using the cards for purchases that they would have made using ordinary credit cards in the first place.

While personal finance gurus believe the practice is a smart manipulation of credit card issuers, debt advisors have warned that ‘credit hackers’ face serious risks that could lead to long-term debt. The recent Lifehacker profile warns against churning for anyone that struggles to control their spending or currently has credit card debt.

Advocates of credit hacking note that, when carried out properly, the practice can actually improve credit scores. Since so many transactions are carried out and the cards are used so frequently within the promotional period to maximise rewards, many churners have improved once poor credit scores through ‘credit hacking.’

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Regulator: Credit Card Industry Encourages People to Go Into Debt

04-AprilThe Financial Conduct Authority (FCA), Britain’s leading financial regulator, claims that credit card companies are encouraging consumers to take on ‘excessive’ levels of debt through attractive offers tied to high-interest, high-fee credit cards.

The watchdog plans to investigate the conduct of the country’s £150 billion credit card market. It was recently revealed that over nine million consumers are trapped in a debt cycle, using high-interest credit cards for the majority of their spending.

New offerings from credit card companies with high fees and minimal restrictions have been dubbed ‘payday loans with plastic’. Regulators fear that, as payday loans are restricted via advertising bans and limitations, the credit card industry will start to target the same vulnerable consumers.

According to the FCA, more than 18 per cent of adults in the UK are vulnerable due to their levels of consumer debt. Of the nine million people with serious credit card debt, more than one million only manage to make the minimum monthly payment on their balance.

The FCA investigation will look at the ‘culture, ethics, and business models’ of some of the country’s top lenders, according to FCA chief executive Martin Wheatley. The regulatory authority previously investigated over 50,000 payday loan providers and debt management firms.

Key factors of the investigation will include the amount of information disclosed by lenders to borrowers, such as the cost of credit and the fees involved in using credit cards to make purchases. The investigation will also observe how banks deal with borrowers who fail to make timely payments on their account balances.

Consumer rights campaigners believe that the probe is long overdue, and that credit card providers have avoided the strict regulations placed on payday lenders for too long. Which? executive director Richard Lloyd claimed that many credit cards were designed primarily to ‘catch customers out.’

UK consumers possess approximately 56 million credit cards and spend over £150 billion using their cards every year. An estimated 8.4 million households have little or no savings, according to the Financial Conduct Authority.

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Credit Card Fraud Victims ‘Should Be Treated Better’

March-29Of the 1.5 million people targeted by credit card fraudsters in the last year, 10 per cent were denied refunds or compensation. Watchdog group The City claims that banks mistreat customers who have been defrauded by criminals in an effort to reduce the amount paid out in compensation to account holders.

Next week, the watchdog group will investigate whether credit card issuers have taken part in deliberate schemes to avoid reimbursing defrauded consumers for their losses. The group believes that tens of thousands of people were denied the refunds they were entitled to under the law after being targeted by fraudsters.

According to the Financial Conduct Authority, over 1.5 million people are affected by credit and debit card fraud each year. Most have cash stolen from their accounts via online hacking and cashpoint fraud, with losses running upwards of tens of millions of pounds per year across banks and credit card providers.

Banks are required to shoulder the charges when a credit card is hacked or violated at no fault of the account holder. The Financial Conduct Authority’s new review into bank and credit card issuer practices could help approximately 170,000 people per year, according to an FCA spokesperson.

University of Cambridge credit card fraud expert Ross Anderson claims that the FCA investigation is “long overdue”. He said: “I have cases going back seven or eight years of banks turning away genuine fraud victims with the response that ‘our technology is secure, therefore it’s your fault’.” 

Mr Anderson believes that many bank anti-fraud employees mistakenly believe that the cards’ technology is secure because of their training. Under current laws, banks need to reimburse victims of credit card fraud unless they are considered “grossly negligent” of failing to take even basic precautions to protect their credit cards.

If the FCA investigation exposes institutional failures to protect consumers from credit card fraud, banks could be subject to fines.

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March-28Online criminals are now breaking into people’s Twitter accounts before they try to hack their credit card information, a new report from online security expert Michael Callahan claims.

Callahan, who works for Juniper Networks, notes that some Twitter accounts can be worth significantly more than a person’s credit card number, as they reveal personal information that can be used to access email accounts, online banking panels, and an assortment of other personal online assets.

Access details for Twitter accounts are sold online to fraudsters, who frequently use them to steal from online wallets and hijack personal accounts. While the number of a user’s credit card is worth $20 to $40 on most online forums when “fresh”, Twitter accounts with large amounts of personal data can fetch as much as of $325.

The value of a Twitter account varies based on the amount of information it can give hackers about a person’s online identity. Since many people use the same password to access social networks and email accounts, hacked Twitter credentials can often be used to access hundreds of different websites using a stolen identity.

Inexpensive Twitter accounts are sold for approximately $16 on many online hacker forums, attracting interest from fraudsters who use online identities to defraud web applications and extract personal information. Valuable Twitter accounts sell for as much as $325 if they’re seen as worth targeting by cyber criminals.

Hackers often “brute force” other applications using the login credentials taken from stolen Twitter accounts in order to access online banking, e-commerce and a range of other accounts. Analysts believe that other social networks, such as Facebook, will soon also be targeted by hackers as credit card security improves.

With many credit cards now automatically blocking suspicious transactions, hackers are increasingly targeting less secure online payment platforms and accounts to find user data. Most of this data is sold to black market firms that rack up huge charges on victims’ accounts.

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Poor Credit Scores Cost Families Dearly

February-21Think a low credit score only affects your access to credit? Think again. Families that have poor credit scores spend an additional £1,170 per year using their credit cards to buy everyday household items and cover living expenses, according to a report from credit card provider Aqua.

The report, called “The Cost of a Poor Credit Rating”, reveals the immense cost a low credit rating can have on everyday household expenses. Over the course of a year, a household with a poor credit score will spend hundreds – often thousands – more than it needs to on basic expenses like utility bills and credit card accounts.

It also reveals that a staggering 57% of British adults are at risk of being declined if they apply for credit due to poor credit histories. Mainstream lenders exclude over half of the country’s population from accessing credit due to bad historical records regarding access to credit.

Progressive Credit chief executive James Corcoran stated that the credit card issuer commissioned the report because it believes in “the importance of helping people be better with money, and so be better off.”

“The irony is that the people who need their money to go further are the ones who end up paying more.”

Individuals and families with poor credit ratings are often restricted from accessing long-term financing contracts, which offer the best value for money. Instead, they’re forced to use month-by-month contracts, which are significantly more expensive, as many companies prevent them from accessing long-term, affordable credit.

Highlighting the large gap in pricing for those with good credit and those with poor credit, the report lists the average cost of broadband broadcast packages for families in the UK: just £59.88 per year for families with good credit, and an astounding £174 for families with a poor credit history.

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South Korean Regulators Punish Credit Card Companies

February-17After more than 20 million people had their credit card information stolen and sold to deceptive marketing firms, South Koreans have plenty of reasons to be upset with their credit card providers.

The South Korean government is equally appalled, and this week it decided to fine the country’s three largest credit card firms 6 million won (£3,371) each. The fines may be relatively insignificant financially, but they come with a costly penalty for the credit card firms – all are banned from issuing new cards for three months.

More than 40% of South Korea’s credit card users had their data stolen during an attack on the Korean Credit Bureau’s computer system. A contractor working with the credit ratings agency reportedly stole the information by saving account details to a USB stick during a two-month job with the company last year.

The data was subsequently sold to credit card fraudsters and marketing firms, who many believe are using the credit card numbers and account names to sign people up for unwanted services. The theft and subsequent fraud was caused by the three firms “neglecting their legal duties of preventing leakage of customer information.”

Credit cards are big business in South Korea, which has one of the highest rates of usage in Asia. Many adults in South Korea own several cards and switch between credit card providers based on special offers and rewards. In the last three years, however, credit card records have been frequently targeted in cyber attacks.

The recent security breach at the Korea Credit Bureau comes just one year after two ackers stole more than 8.7 million credit card records from KT Mobile. Just one year earlier, more than 35 million accounts were stolen from South Korean online social network Cyworld.

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Pensioners Find it Hard to Quality for Credit Cards

February-13Pensioners are struggling to quality for credit cards. In a recent letter to the Sunday Express, a pensioner and Lloyds customer for almost 60 years reported that she her application for a credit card had been turned down due to her age.

From the original letter:

“A TSB and Lloyds customer since she was 17, Olive had a bank card but swapped it for an M&S store card for a couple of years. ‘Now I want a credit card to use on the odd occasion I buy on the Internet,’ she says.

I have contacted Saga, TSB and some other banks and have been told that I am too old, that the cut-off age is 74 or that my income, about £6,200 a year, is not enough.”

According to finance website Moneyfacts.co.uk, there are no fixed cut-off rules about credit cards. Cards are issued based on factors such as income, age and ownership of your own home.

Interestingly, older customers are deemed “more risky” at many banks. As many old customers are on a pension, they often do not qualify for a credit card due to income requirements used by many banks.

Saga, for example, requires new customers to have an income of at least £12,000 in order to qualify for a credit card. While TSB doesn’t automatically turn down older applicants, it does refer customers 75 and up to a central lending unit in order to assess their income and reliability.

Moneyfacts.co.uk recommends that older customers looking to acquire their first credit card instead look at “credit repair” cards. These cards offer a smaller credit limit and are primarily used by customers aiming to improve an otherwise poor credit score.

Prepaid credit cards – in which an account balance is loaded onto the card prior to use – are also an option for pensioners in need of a credit card for use online. These cards are widely available and have far less restrictive minimum qualifications.

Like credit cards, they offer protection form theft and fraud, making them a fantastic option for pensioners and older customers looking for a reliable credit card to use for online shopping.

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