Apple Plans Service That Lets iPhone Users Pay With Handsets

By Olga Kharif

from http://www.bloomberg.com/

Apple Inc. plans to introduce services that would let customers use its iPhone to make purchases. Photographer Rupert Hartley/Bloomberg 

Apple Inc. plans to introduce services that would let customers use its iPhone and iPad computer to make purchases, said Richard Doherty , director of consulting firm Envisioneering Group. 

Photographer: Tony Avelar/Bloomberg 

Apple Inc. plans to introduce services that would let customers use its iPhone and iPad computer to make purchases, said Richard Doherty, director of consulting firm Envisioneering Group.

The services are based on “Near-Field Communication,” a technology that can beam and receive information at a distance of up to 4 inches, due to be embedded in the next iteration of the iPhone for AT&T Inc. and the iPad 2, Doherty said. Both products are likely to be introduced this year, he said, citing engineers who are working on hardware for the Apple project.

Apple’s service may be able to tap into user information already on file, including credit-card numbers, iTunes gift-card balance and bank data, said Richard Crone, who leads financial industry adviser Crone Consulting LLC in San Carlos, California. That could make it an alternative to programs offered by such companies as Visa Inc., MasterCard Inc. and EBay Inc.’s PayPal, said Taylor Hamilton, an analyst at consultant IBISWorld Inc.

“It would make a lot of sense for Apple to include NFC functionality in its products,” Crone said.
The main goal for Apple would be to get a piece of the $6.2 trillion Americans spend each year on goods and services, Crone said. Today, the company pays credit-card processing fees on every purchase from iTunes. By encouraging consumers to use cheaper methods -- such as tapping their bank accounts directly, which is how many purchases are made via PayPal -- Apple could cut its own costs and those of retailers selling Apple products.

Apple's plans could change, and the new products may be delayed or not come to fruition. Natalie Harrison, a spokeswoman for Apple, declined to comment.

Adding Features to Phones

“NFC is definitely one of the technologies that’s getting a lot of attention, but ultimately the consumer is going to choose,” said Charlotte Hill, a spokeswoman for PayPal, owned by San Jose, California-based EBay. Elvira Swanson, a spokeswoman for San Francisco-based Visa, said the company is “excited to see NFC mobile devices coming into the market.”

Ed McLaughlin, chief emerging payments officer at MasterCard, said the company is “running the world’s fastest payment network, and that doesn’t need to be re-created.” MasterCard sees NFC “as an opportunity to partner with organizations” and already has run NFC payment trials around the world.


The recently passed Durbin Amendment makes the timing right for a push by Apple, Crone said. The regulation, which will go into effect this summer, may limit debit-card fees paid by retailers and lets them encourage consumers to use one payment method over another.

Competing With Android 

Under Apple Chief Operating Officer Tim Cook, who’s handling day-to-day operations as Chief Executive Officer Steve Jobs takes medical leave, the iPhone is adding features that will help it compete with phones that use Google Inc.’s Android software. Samsung Electronics Co.’s Nexus S phone, which runs Android, can read information from NFC tags. Nokia Oyj, the world’s largest maker of mobile phones, has pushed NFC adoption for years, though the technology has been slow to take off.
“Apple could be the game-changer,” Doherty said.
Apple, based in Cupertino, California, is considering starting a mobile payment service as early as mid-2011, Doherty said. It would revamp iTunes, a service that lets consumers buy digital movies and music, so it would hold not only users’ credit-card account information but also loyalty credits and points, Doherty said.
Using the service, customers could walk into a store or restaurant and make payments straight from an iPad or iPhone. They could also receive loyalty rewards and credits for purchases, such as when referring a friend, Doherty said.

Targeted Advertising 

Apple also could use NFC to improve how it delivers mobile ads to customers’ handsets and charge higher fees for those ads, Crone said. NFC would let Apple’s iAd advertising network personalize ads to the places where a customer is spending money. That could double or triple the ad rates that Apple charges, Crone said.
Apple has created a prototype of a payment terminal that small businesses, such as hairdressers and mom-and-pop stores, could use to scan NFC-enabled iPhones and iPads, Doherty said. The company is considering heavily subsidizing the terminal, or even giving it away to retailers, to encourage fast, nationwide adoption of NFC technology and rev up sales of NFC-enabled iPhones and iPads, he said.

To help get ready for NFC, Apple last year hired Benjamin Vigier, who worked on the technology at mobile-payment provider MFoundry. It also has applied for a patent on a system that uses NFC to share information between applications running on various Apple devices.

Visa iPhone case lets you pay without a credit card

Josh Smith

From: http://www.walletpop.com/

In a near perfect example of convergence, soon you'll be able to use your iPhone as a VISA card. Visa and DeviceFidelity have teamed up to introduce In2Pay, a case that turns your iPhone into a credit card. The resulting device will allow you to use the iPhone at approximately 150,000 retail outlets nationwide that have terminals that accept contact-less payments like Visa payWave.

The case, which connects to the dock of your iPhone, adds a MicroSD card slot in which a DeviceFidelity MicroSD card is used to make the secure contact-less payments. The In2Pay case is designed to stay on your phone and includes a Micro USB port for charging and syncing your phone. The price of the case and the use of mobile payment services will be determined by the individual financial institutions, according to Dave Wentker, head of mobile contact-less payments for Visa, in an e-mail to WalletPop.

Because the iPhone Visa case uses Visa payWave and industry standards, you'll be able to use your iPhone as a Visa card at all types of retail environments, ranging from restaurants and convenience stores to unattended kiosks and baseball games. You can view all the payWave locations near you on this handy map from Visa and view a demo of the new iPhone Visa case below.



To use the iPhone to make a Visa payment, users will need to launch an app, click "pay" and then wave their device in front of a contactless point of sale system. As part of the security, the device will only transmit payment information when you click pay. Users can set a password lock on the app, but it is optional so that users who already have a lock to access their iPhone don't need to enter yet another password. If you lose your iPhone with an In2Pay case, you'll need to call your card provider just as you would with a regular credit card.

One issue with the current setup is that many users already have a favorite iPhone case. It could be one that works with a wireless charging station, acts as an extended battery or just provides protection. Whatever your current case situation, you may need to alternate or adjust your use if you plan to add In2Pay to your iPhone. Perhaps we'll see future iPhone models come with the DeviceFidelity technology built right in.

When asked if users of other devices can expect to see similar technology in the near future, Wentker confirmed that the technology will work in other smartphones with a MicroSD slot, but he didn't provide any specific dates or devices.

The Visa iPhone case will be in testing during the second quarter of 2010, so there's still a bit of time before you can start making payments at your local coffee shop. When In2Pay does arrive, your iPhone, combined with a loyalty rewards card app like CardStar, could easily replace your wallet for quick trips out of your house.

Source

5 Evil Things Credit Card Companies Can (Still) Do

by Julianne Pepitone

by

The credit card reform bill tries to help cash-strapped customers, but companies are coming up with new ways to boost profits.

Photo: Chuck Kennedy / White House Photo Office

President Obama discussed credit-card reform in Rio Rancho, N.M., in May.

The Bill

Credit card companies are socking it to consumers left and right.

They're hiking interest rates to as much as 36% and doubling minimum monthly payments, frustrating customers who are already cash-strapped and credit-crunched.

In an effort to curb these abusive practices, President Obama signed into law a credit card reform act in May that's rolling out in three parts over 12 months.

At the same time, credit card companies have been hard at work coming up with new ways to boost profits while sidestepping the reforms.

"Card issuers are making sure they can make up the lost money in new ways," said Bill Hardekopf of Lowcards.com, a research company funded by a commercial debt collector.

The first part of the law, which took effect in August, requires banks to give customers more notice ahead of major changes to their accounts, like rate hikes. Starting in February, limits will be imposed on when issuers can raise rates on existing card balances, and on new cards. In August 2010 some credit card penalty fees will be will reined in.

But no legislation can fully shield consumers from the credit card industry's ongoing efforts to boost the bottom line.

The worst part? "All of these hikes are taking place simply because they can," Hardekopf said.

Photo: Youtube.com

Ann Minch's YouTube video convinced BofA to drop her rate to 12.99%.

1. Rate Hikes

Interest rates are out of this world.
"They've increased steadily over the past 5 years, and in general are higher than they've ever been," said Josh Frank, senior researcher at the Center for Responsible Lending (CRL), who says he's seen annual percentage rates as high as 36%.

No current laws cap credit card interest rates, according to Pamela Banks of Consumers Union, the nonprofit publisher of Consumer Reports, so technically the sky's the limit.

But the CARD act will help curb abusive practices. As of February, issuers won't be able to arbitrarily raise rates on existing balances. But cardholders will still be subject to interest hikes for late payments and various other infractions.

And card companies will be able to raise their rates as high as they want, whenever they want, on future purchases even after the reform bill kicks in completely.

The act will bring protections for new customers; issuers will no longer be able to hike rates on new accounts in the first 12 months, unless the borrower is delinquent by more than 60 days or the increase is stated in the contract.

Keven Vallance recently saw the rate on his Sears card increase from 9.99% to 13.99% for no apparent reason. When Vallance called Sears Credit, which is owned by Citibank, a rep told him every cardholder's rate is increasing by 4%.

Citi spokesman Samuel Wang said in an email that the company has "adjusted pricing and card terms for some customers as part of our regular account reviews."

Consumer outrage is boiling over. Last month, a disgruntled Bank of America customer posted a YouTube video complaining her bank "jacked up my interest rate to a whopping 30% APR." Her rant went viral, and BofA dropped her rate back to its original 12.99%.

Courtesy: House.gov

Rep. Barney Frank hopes a new consumer protection agency can curb credit card fees.

2. New Fees

Fees aren't just rising -- they're multiplying. Cardholders are getting slapped with fees they've never seen before.
The hitch: New laws can address only existing fees and business practices; they can't predict what credit card companies will do in the future.

"Theoretically, they could create a fee for names that begin with 'J,'" said Lowcards.com's Hardekopf.

In reality, customers are seeing new annual fees, inactivity charges and more. Not of these charges are unheard of, but many fees that were unusual are becoming commonplace.

Earlier this month, for instance, some Bank of America customers were shocked to learn that their no-fee credit cards would be subject to a new annual fee.

BofA spokeswoman Betty Riess said the fees are part of a company test that affects 0.5% of all consumer accounts, and that the fees range from $29-$99.

The charges will be levied in February, and Riess said customers were chosen "based on risk and profitability" but have the option to reject the fees by canceling their accounts.

Fifth Third Bank recently introduced a $19 inactivity fee for customers who don't charge anything for 12 months, and Citibank is hitting some consumers with a fee if they put less than $2,400 on their card annually.

To address this problem, House Financial Services Committee Barney Frank (D-Mass.) has proposed a new regulatory body, the Consumer Financial Protection Agency, which would approve new credit card fees. While the House Financial Service Committee approved the agency, it remains to be seen whether legislation will pass; lawmakers are battling over this and other reform proposals floating around Washington.

Photo: Jupiterimages

3. Higher Minimum Monthly Payments

Banks are also demanding bigger and bigger minimum payments. Chase has bumped up the minimum payment for some consumers to 5% of the monthly balance from 2%.

For someone who carries a $5,000 balance, that means the monthly payment of $100 skyrockets to $250 -- a whopping 150% increase.

Consumer Union's Pamela Banks says her organization has compiled a wealth of anecdotal evidence that indicates such increases in minimum monthly payments are widespread.

"This is making payments virtually impossible for some people," she said. "It's throwing people off when they were living on a tight budget anyway."

Some good news is on the way, however. After February, card companies won't be able to increase monthly minimum payments by more than 100%. For example, a bank cannot increase a 2% minimum payment to any higher than 4%. And this so-called "doubling" will be allowed only once during the life of the card.

Photo: Photodisc / Jupiterimages

4. Fewer Rewards

Say goodbye to beach vacations and new iPods just for swiping your card.

Rewards programs have been enticing shoppers to charge a purchase rather than paying cash -- but card issuers are cutting back those perks.

"This is happening with a significant amount of cards," Hardekopf said, adding that many consumers are now receiving 1% cash back instead of the 2% or 3% they once enjoyed.

American Express recently cut its Blue Card's cash back policy from 1.5% to 1.25%. And all AmEx customers who make a late payment will no longer accrue points on their purchases -- however, those points can be reinstated with a $29 fee.

5. Slashed Credit Limits and Canceled Accounts

Without so much as a call from the bank, some customers are learning their credit limits have been slashed by as much as 75%, or that their accounts have been closed altogether, according to the Center for Responsible Lending's Josh Frank.

Citibank recently closed what a spokesman called a "limited number" of MasterCard gas cards co-branded with Citgo, ExxonMobil, ConocoPhillips and Shell.

"People go to make a purchase, and they find out about these huge changes only when they're denied," Frank said. "It's a shock, and it's been happening a lot."

Even cardholders who don't charge anything might find their accounts abruptly closed, Frank said. With credit losses at a record high, companies see inactive cards as a red flag and close the accounts to avoid the worry of future writedowns.

"Usually cardholders have this credit line available for an emergency, for this kind of current economic situation," Frank said. "But now they're turning to it when they need it, and it's gone."

What's a Cardholder to Do?

Consumers must pay close attention to the terms of their contracts, staying alert to any changes.

"It's boring reading, and it can be hard to understand, but that's where everything is spelled out," said Lowcards.com's Hardekopf.

Of course, while there are laws aimed at helping consumers, legislation can't do it all.

"As we close the loopholes on some things, they open up elsewhere," said Consumer Union's Banks. "Reform acts don't cover everything, and cardholders have to watch out for their own accounts."

And if you don't like your credit card's new terms? "Shop around -- you are not married to your card," Hardekopf said. "It's a partnership, not a lifelong contract."

Copyrighted, CNNMoney. All Rights Reserved.

Gmail Users Have Higher Credit Scores than Yahoo Mail Users

by Pete Cashmore

Does your email address reveal something about your credit score? According to Credit Karma, an online credit checking service, it might.

The company has taken data from its users and split it up by email address, finding that Yahoo Mail users have the lowest credit scores of all. Bellsouth and Comcast users have the highest credit ratings, while GMail () users rank third. MSN, Hotmail and AOL users take 4th, 5th and 6th position respectively.

Assuming the data is accurate (and the sample size is large enough – 20,000 credit scores), the more interesting question is why. Could it be because AOL, MSN and Yahoo email addresses are often linked to IM accounts, where the demographics skew younger? Do those who use their ISP-provided email address skew older? Let us know your thoughts in the comments.

[via HN]

Your Credit Score Versus the United States (Infographic)

Financial Responsibility in the United States

BillShrink Guy

Your credit score is a very important part of personal financial health, insuring that credit is extended to you, and at the best rate possible. There are various factors considered when calculating your individual score, and it is important to be familiar with exactly how each of these positively or negatively affects your personal rating. The following map shows averages by state, so you can see how you stack up to the rest of the country.

(click to enlarge)

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10 lies that got you (and keep you) in credit card debt

By Karen Datko

This post comes from partner blog The Dough Roller.

While we don't have any credit card debt now, except for 0% APR balance transfers, there was a time when we did. While we never let our credit cards get completely out of control, we did build up several thousand dollars on our credit cards when I first got out of college.

So having gotten into card debt and then climbed out of it, we've learned many of the causes of this financial pain. The fact is, we can talk ourselves into using our credit cards in ways that will hurt our finances down the road.

So here are 10 lies we tell ourselves that get us in credit card debt and keep us there.

It's an emergency. Often we go into debt by convincing ourselves that we have an emergency. Certainly there are times when a true emergency arises. Medical expenses are a good example of a real crisis. But many times what we call an emergency isn't really an emergency. Whether it's a second car that needs repair, or even our child's college education, we can often go without addressing what at first seems like an urgent expense. If life or liberty isn't at stake, it's probably not a true emergency.

We deserve it. This one has snagged us more than once. After working so hard to save money and spend wisely, sometimes we let our guard down under the guise of a reward. Perhaps you've had a hard week at work, and spending $150 on a fancy dinner that you can't really afford seems like a good idea and something you've earned. The problem is that it's like taking one step forward, two steps back. The "reward" just digs you deeper and deeper into debt.

We all need a break now and again. But if you are fighting credit card debt, don't go into more debt as a reward. Find some other way to reward yourself that doesn't make your financial problems more severe.

It's a bargain. Bargains are great, but they shouldn't be used as an excuse to spend more than we have. Great deals also shouldn't be used to buy more than we need. The one thing I've learned is that great deals generally come and go pretty regularly. Regardless, it's not a great deal if you spend a ton of money on credit card interest paying off the debt over months or even years.

It's not much money. It's so easy to spend money we don't have if we spend it in small amounts. Here's a factoid: Last year the Bush stimulus bill sent out stimulus payments to those taxpayers who qualified. Under the 2009 stimulus plan, payments will not be sent in lump-sum checks. Instead, those taxpayers who qualify for a stimulus payment will see their take-home pay increased each month by about $7 to $13. Why? Because we are more likely to spend an extra $10 or so each month than we are a lump-sum $400 to $800.

The same is true with "small" credit card debt. Enough small charges on the card over time can grow into a mountain of debt. If you are fighting your way out of credit card debt, there is no such thing as a small credit card charge.

The payment is small. Let's be honest. How many have justified a purchase based on the monthly finance cost? We all do that when we buy a home, asking ourselves if we can afford the payments. But with credit cards, it can be a real problem. Because most cards calculate the monthly payment at about 2% of the outstanding balance, payments are extremely small compared with the amount owed.

For example, you can nab a $1,000 TV and pay "only" about $20 to $30 a month for it. The small credit card payments have probably caused more financial turmoil for many consumers than any other factor. Remember, the payment may be small and manageable at first, but buy enough on credit and the payments grow substantially. On top of that, you still have to pay back the borrowed amount with interest.

The card rewards make it worth it. We take advantage of many travel reward credit card offers and cash-back rewards. But if the allure of these awards is putting you deeper and deeper into debt, they just aren't worth it. If you pay off your card each month, the rewards are great. But if you don't, stay away from them. In fact, if the rewards are tempting you into credit card debt, get a card without rewards or just use your debit card.

Offers of 0% APR on purchases. The 0% APR and low-interest credit cards can be like a drug dealer giving away his product for free -- at first. Once you're hooked, prices go up, way up. In the case of credit cards, once the 0% APR introductory rate expires, interest rates can easily soar into the double digits. To avoid this, I've often turned down 0% APR deals, particularly those offered by furniture stores and other retailers. If you are going to use a 0% APR deal on purchases, make sure you can pay off the balance in full before the offer expires.

Offers of 0% APR on balance transfers. We've saved a ton of money with balance-transfer credit cards. We transferred home-equity debt from a home remodeling to 0% APR cards and have saved literally thousands of dollars in interest. But we also make sure to pay off the balance transfer before the 0% APR rate expires. We also make sure not to use the card for anything else while we still have a balance on the transfer deal.

Balance-transfer offers can be great, but just like 0% APR purchase offers, make sure you can pay off the debt before the 0% APR offer expires.

It's for my business. A business credit card, particularly for small companies, can serve many important roles. Business cards can be used by employees to easily track their expenses. They can also help keep your business expenses separate from personal expenses, which is particularly important at tax time. But like all credit cards, business cards can also cause you to spend more than you should. It's easy to justify the expense as necessary when you may be able to do without. All small-business owners have to decide for themselves, of course, just how necessary an expense is, but with business credit cards, it can be easy to spend more than you should.

I'll pay it off after graduation. This is perhaps the most insidious credit card lie of all. Study after study shows that the outstanding credit card balance for college students increases as they near graduation. There are a lot of reasons for this, but one reason is that they convince themselves that they can handle the debt once they graduate and get a job. The problem is that they start out in the workforce already in the hole. Credit card debt of $10,000 or more is not uncommon for college graduates. Add to that school loans, and debt can be overwhelming even before they get started.

So if you are a high school or college student, avoid revolving credit card debt like the plague.

Credit Cardholders' Bill of Rights: What it means for you

by Karen Datko

This post comes from partner blog The Dough Roller.

While the $700 billion bailout and presidential election have dominated the news, the U.S. House passed a major piece of credit card reform legislation. The Credit Cardholders' Bill of Rights Act of 2008 passed the House on Sept. 23 by a vote of 312-112 (with nine members not voting).

The bill, which still needs to pass the Senate before heading to the White House, would have a major impact on everything from how credit card issuers apply cardholder payments to outstanding debt to limits on interest rate increases.

Here are some of the more significant provisions of the act:

Retroactive interest rate increases and universal default limits. One of the biggest complaints leveled against the credit card industry is the practice of raising interest rates significantly due to a late payment or other default, or sometimes for no reason at all. The Credit Cardholders' Bill of Rights would limit a card issuer's ability to raise interest rates. Specifically, a credit card company could not (with some exceptions) raise interest rates on existing balances. Furthermore, if the interest rate on future balances was raised, the credit card issuer would be limited in how quickly it could insist that the old balance subject to the lower interest rate is paid off.

Here are some other interest rate-hike protections the act would provide:

• If a cardholder loses the benefit of an introductory rate, the new rate could not exceed what the interest rate would have been at the expiration of the introductory period.

• A consumer must be given a 45-day written notice before higher interest rates take effect.

Pro rata payment allocation. The act's provisions related to pro rata payment allocation are absolutely critical to balance-transfer credit cards. Here's the problem. Suppose you have a $5,000 credit card balance at 0% from a balance-transfer offer. Let's also assume that you've charged $500 worth of purchases that are subject to a interest rate of 10%. If you pay $500 at the end of the month, which balance does it go toward?

Under most credit card agreements today, the payment would go to the 0% balance first. Only when that was paid off would you begin to make a dent in the $500 balance subject to 10% interest. That's why I never use my balance-transfer cards for purchases. Under the statute, however, credit card companies would be required to allocate your payments across both the interest-free balance and the balance subject to a higher interest rate.

Double-cycle billing. The statute would also attack a practice that has long been criticized by consumer-advocacy groups, double-cycle billing. Under this practice some credit card issuers go back two billing cycles, not just one, to calculate a cardholder's average daily balance. The result can mean that you will pay interest on balances you paid off the previous month. This chart from a GAO report does a nice job of describing this practice:

Statements must be sent 25 days before payment is due. The Credit Cardholders' Bill of Rights would require credit card companies to send out your bill at least 25 days before it is due. The intent is to give consumers ample notice and an opportunity to pay the bill before interest charges accrue.

Over-the-limit transactions. This is where common sense and sunshine break through the dark clouds of consumer credit. Today credit card companies charge a fee if you go over your credit limit. The problem is that they let you go over the limit. Rather than rejecting a transaction that would cause you to exceed your available credit, the credit card companies approve the transaction, and then whack you with a fee.

One could argue that consumers should know their current balance and their credit limit, and not make purchases that send them over the limit. True enough. But there is something a bit twisted with the current scheme. The act would allow consumers to elect to have their credit card company reject any transactions that would send them over their limit.

Subprime or fee-harvester cards. This covers the truly dark side of the credit card industry. There are a variety of "bad credit" credit cards aimed at those with poor credit. The terms of the cards make payday loans look like a good deal. For example, check out the terms of the Tribute Gold MasterCard:

• Credit limit: $300

• Annual fee: $150

• Account-maintenance fee: $119.40 (billed monthly at $9.95)

• APR for purchases: 24.50%

Here's how that adds up, according to the credit card issuer: If you are approved for the $300 card, your credit line will be $300 and your annual fee of $150 will appear on your first statement. Your initial minimum payment of $30 must be received, cleared and posted on your credit card account before you can activate your card and use your credit card account. Your initial available credit will be $180. You will be billed an account-maintenance fee of $9.95 per month (total of $119.40 per year), beginning after you make your first purchase or cash advance.

The bill does not put a stop to these types of predatory lending practices, but it tries. What the bill provides is that if annual fees the first year exceed 25% of the available credit, the fees cannot be charged to the card. So in the case of the Tribute card, the consumer would have to shell out the $150 fee and annual account-maintenance fees rather than having them "conveniently" added to the card.

Impact on credit card offers. As you might imagine, the credit card industry is not in favor of the statute. Like any consumer-protection law, there would be some unintended consequences. For example, some credit card issuers have already started to raise interest rates on some cardholders in anticipation of this type of credit card reform becoming law. In addition, there is the potential for this act to have a negative impact on balance- transfer offers, cash-back rewards, travel rewards, and other lucrative credit card offers.

If you'd like to read the statute in its entirety, you can check it out at GovTrack, a great site to track federal legislation.