A company called Gold Solutions Marketing Inc. Recently issued a press release announcing their new Gold Backed “credit card”, which will be available soon online. The card, which will be branded by either MasterCard or Visa, is supposed to function like a regular credit card, but will be backed by gold bullion coins you have to deposit into an account. If you don’t currently have any gold, the press release states that you will be able to purchase a quantity of gold. ” below market prices”, at the time of your account opening.
Jeff Silver, VP of Gold Solutions Marketing, Inc. was quoted to say, “Those who ‘believe in gold’ can see the new (Credit Card reforms of Feb 2010) law reshaping attitudes and conventions about credit cards that will help make this breakthrough collateralized credit card concept a reality in the very near future. They know that gold, which is a hard asset, can provide a higher level of liquidity and usefulness, while positively impacting the financial picture for millions of Americans” .
Now to be fair, I have to state up front that I am not a big fan of the credit card industry or the big mega banks in particular, and how Congress has allowed, and still allows them to engauge in what many consider to be predatory business practices is a whole different story. But something just didn’t make sense to me in this press release.
First, this is a collateralized credit card, where of the line of credit is backed by an asset you already own. According to Jeff Silver, the ” credit card [will be] based on 75 percent of the value of gold coins on deposit……, which should give the issuing bank a much more secure feeling about extending credit.” You Think ?
Now my mother drowned all of her stupid children, but it seems to me that if I have $20,000 in gold bullion coins, in my possession, why on earth would I ship them off to a depository in exchange for a “credit card” with a $15,000 credit limit?
One would think that if you can afford to be holding $20,000 in gold coins for a rainy day that your credit score would be high enough to be able to secure a regular credit card.
My understanding has been that collateralized credit cards have mostly been reserved for either those people who had no credit history, or with poor credit, so the bank required that they have an amount equal to the credit limit on deposit to insure the bank had collateral access in the case of a default. But with the Gold Backed Card you don’t even get 1 to 1 collateralization, you only get 75%. Doesn’t sound like a great deal to me.
And if, for whatever reason, a person could not secure a regular credit card based on their financial situation or credit history, where are they going to get the cash to purchase gold coins ” below market prices” in the first place?
Plus, what about those infamous “fees” that banks and credit cards now seem to live off of? If you ship off your coins to the credit card’s depository( in this case Delaware Depository Services), aren’t they going to charge a storage fee. I’d bet you that fee will get added into your monthly credit card statement in one form or another.
Also, are your coins stored in a segregated account, or is it fungible storage, where every one’s coins are placed in a common storage account. If it is not segregated, the coins you sent to the depository may not be the ones you get back if you decide to close your account. And what happens if the credit Card issuer/bank fails or goes bankrupt? Are your deposited coins insured if this happens? Lots of questions, the answers to which are usually buried in the fine print.
Don’t get me wrong, I am a strong proponent of purchasing gold and silver bullion, for dozens of both rational and irrational reasons. And while I applaud this company for it’s creative marketing ideas, some of the very reasons I/we purchase gold bullion in the first place is because of a deep mistrust of the financial system. Why on earth would I want to place my gold back into the same system that I am trying to hedge against, and assume that this time around things will work out fine and everyone is going to act in a responsible fiduciary manner.
Thanks, but I think I’ll hold onto my gold and pay cash for all that crap I don’t really need anyway.
For those people out there who know they have to pay to play, there’s a new credit card in town that will blow all the other ones away and let everyone know you are the king (or queen) of the world. Recently the first credit card made entirely from gold, diamonds and pearls was announced. There is a whole world out there that I obviously know nothing about because when I read about this, I couldn’t figure out why anyone would even want it. What would be the appeal for whipping out a gold credit card that is actually made out of gold, diamonds and pearls? It comes with a “free” iPhone 5 and a Montblanc credit card case though, which is a nice little perk.
According to ABC News, “Sberbank in Kazakhastan announced plans to issue a limited edition Visa Infinite Exclusive card made with pure gold, 26 diamonds, and an inlaid mother of pearl.” All that is topped off with a brushed gold finish. In order to qualify for this card, first people will have to receive an invitation. Then they will have to pay $100,000. Of that money, $65,000 will go towards making the card itself, and $35,000 will remain as a balance on the card. In addition to that, there will be a $2,000 annual fee just to sport this badboy in your wallet. The top 100 customers of this bank will receive the first invitations, and then more may be given out after that. That is a lot of commitment just to be allowed to carry around the first credit card that costs more than most cars.
Knowing me, if I had a card like this, I would probably leave it at the gas station or in a restaurant, and it would be gone the first week. If you want to see another piece of luxury that you can slide into your wallet, check out these diamond covered business cards which cost $1,500 each! Between this first credit card made from gold and those business cards that might get bent and drop a diamond, well, let’s just say this is definitely an interesting world we live in.
Alvin Prasad says someone fraudulently drained his prepaid debit card, leaving him without the means to pay his rent.
“I felt sick to my stomach,” he said. “I’m going to get kicked out. I’m going to need a new place to live.”
Prasad said when he called his prepaid debit card company they told him there was not much they could do to resolve the matter.
“I had no idea what to do; I’ve never been in a situation like this,” he said.
Philly DA Seth Williams Indicted On Additional Fraud Charges
Prepaid debit cards, used by 23-million Americans per The Pew Charitable Trusts, do not have the same protections as debit cards connected with banks.
But a new rule from the Consumer Protection Offices will “extend a lot of the same coverage that you see with credit cards (and) debit cards,” Matt Schulz of CreditCards.com said.
The new rules would force financial institutions to investigate fraudulent claims tied to prepaid cards.
In addition, the money will generally be protected if the card is lost, stolen or wrongly charged.
The new rules do not take effect until April 2018 but Prasad’s prepaid debit card company did return his money.
The Senate was set to vote recently on legislation to contravene regulations promulgated by the Consumer Financial Protection Bureau (CFPB) to provide more protections and legitimacy to the prepaid card industry.
Now, the legislation will not come to a full vote after the CFPB announced it would delay the regulations by six months. This six-month delay gives the industry more time to implement the regulations, and the CFPB time to tweak the rules related to digital wallets and limits on liability for unregistered cards. This should satisfy even many of the toughest critics.
In late April I participated in the Payments 2017 Annual Conference in Austin, Texas, and the halls were filled with conversations about new developments in payment technology, making them faster and more secure. Such financial innovation is good for the majority of households but not always for those who are financially vulnerable.
Case in point: Nearly a third of Tennessee’s households are unbanked or underbanked. Many of these families are unable to receive their paychecks quickly by direct deposit and are turning to prepaid cards, a growing category in the payments industry.
For these individuals, cards on the Visa, MasterCard or American Express networks function like a checking account and can be used to set up direct deposits of wages or benefits.
Prepaid card accounts do not require a credit check and most do not allow for overdrafts, making them available even to those who cannot get a bank account.
So, while some of us may buy prepaid cards to control spending for our high school and college-aged children, firms like Walmart, KFC, McDonalds and Home Depot turn to prepaid cards to pay employees, typically lower wage workers.
Today, some prepaid cards come with a catch. Many have fees for everyday uses such as checking an account balance, calling customer service, withdrawing cash at an ATM or with a teller. Some have penalty fees for declined transactions or overdrafts.
While these fees may be reasonable, it is critical for those who rely on these cards to understand these charges. This is especially onerous for workers who are offered no viable option other than using payroll cards provided by their employers.
In addition, many prepaid cards do not have the same federal law protection against fraud, unauthorized charges and errors that bank debit cards have.
To address these issues, the new regulations give prepaid cards the same fraud protections as debit cards. The rules provide a simple, uniform chart of fees and allows people to check their account balances and transaction history for free. Under the new rules, workers must be told of the fees before they accept a payroll card and be reminded they have a choice. The rule caps overdraft fees and requires the fees to be affordable.
The rules will apply not only to physical cards but also to mobile and other prepaid accounts. Whether you access your account with a card or your smartphone, protections from hidden fees and unauthorized charges are important. That’s why the Center for Financial Services Innovation supports the prepaid rule.
These new prepaid regulations will be a welcome change for the one in eight Tennesseans that used prepaid cards in 2015. They will provide the field with needed guidance and further protect Tennessee workers.
Some lawmakers may still worry that the cost of the regulations will push prepaid cards out of reach, punishing those it was designed to protect. But that fear has been widely dismissed by many within the prepaid industry, including the leading provider, Green Dot, whose CEO supports the rules.
Tennessee Senators Bob Corker and Lamar Alexander should understand how these regulations truly protect all Tennesseans who use prepaid cards. I’m thankful our senators were pragmatic and waited for the CFPB to tweak the regulations to address industry concerns—instead of simply pulling the plug on critical consumer protections.
If your bank debit card or credit card is stolen, federal regulations limit your liability for unauthorized charges.
But if you are one of the tens of millions of Americans who use prepaid debit cards, there’s no such protection in the event of theft or loss. That’s just one example of the disparity between cards. The real shame is that many of the Americans using prepaid debit cards don’t have bank accounts or credit cards.
Many low-wage workers receive their paychecks on electronic debit cards. Some Social Security beneficiaries receive their monthly benefits on a prepaid debit card.
These prepaid cards are a great convenience over carrying large amounts of cash. Loading paychecks or government benefits on a card allows people to get quicker, more secure access to their money. Some folks use prepaid debit cards to avoid getting charged bank overdraft fees.
Unfortunately, some of these prepaid cards haven’t worked as well as they should because some card companies don’t clearly disclose all their fees upfront. Other prepaid debit cards have offered consumers “protection” that turns out to be fees for overdrafts — one of the problems the prepaid cards were expected to prevent.
Complaints about such problems prompted several years of federal review of rules to better protect consumers. Some states, including Montana, have rules protecting workers, including the requirement that Montana workers not be forced to accept payment on a prepaid debit card. Social Security works with just one prepaid card provider, and that one is subject to fee disclosure rules.
But the present rules don’t protect all Americans, and the rules don’t protect prepaid debit card users on par with other electronic card users.
Rules finalized by the Consumer Financial Protection Bureau are scheduled to take effect on Oct. 1. But the wave of anti-regulation fervor in Congress threatens to kill the debit card protection. So far this year, Congress has already used a previously nearly unknown law (the Congressional Review Act) to repeal many environmental regulations. Politicians are targeting the debit card rules partly because they want to eliminate the entire Consumer Financial Protection Bureau, which was created in response to the financial crisis that sparked the Great Recession in 2008.
Consumers Union summarized what the rules would require: fees disclosed upfront; fraud protection; disputes resolved promptly; free and easy access to account information (either with monthly paper statements or a website); and overdraft features such as giving customers at least 21 days to repay their debt before being charged a late fee.
The final rule was released on Oct. 5, 2016. It was immediately endorsed by a major prepaid card company, Green Dot, whose chief executive officer, Steve Streit, said: “We fully support the CFPB’s mission to ensure fairness, integrity and consumer protections for all participants in the financial system. For many years, Green Dot has voluntarily provided full checking account style consumer protections for its customers and has never charged overdraft or penalty fees on prepaid and checking products.”
Although Consumers Union reports that most industry leaders support the rules, one big company doesn’t. NetSpend, which is based in Georgia and Texas, has persuaded U.S. senators and representatives from those states to lead an effort to nix the rules.
If repealed under the CRA, these consumer protections couldn’t be implemented for at least several years — after going through a public rulemaking process again.
Attorneys general from 17 states, including Iowa, Maine, Minnesota and Washington, wrote to congressional leaders last month, urging them to oppose the attempts to scuttle the rules. The attorneys general noted concerns about U.S. college students who received $2.72 billion in financial aid on prepaid debit cards last year.
“The final rule provides common-sense protections to some of the most vulnerable consumers — those who do not have access to bank accounts,” the attorneys general wrote.
We call on Congress to protect millions of average Americans and not reject the rules.
After the huge Target breach of 2013, you’d have thought retail companies would have figured out how to protect their cash register systems from malware that attempts to steal customers’ data.
Then came Home Depot. Then Neiman Marcus. Then Wendy’s. In the past few months, Chipotle, Arby’s and Kmart were all hit. Why are these attacks still happening?
Time and money, say experts. It takes time for companies to rebuild point of sale systems more securely and shift from magnetic stripe credit and debit cards to more secure chip cards. They need money to hire tech staff to secure those networks, money to buy software to do the securing and money to buy new, encrypted point-of-sale machines.
“It’s expensive and complicated to get systems to up the point they’re really hardened against these kinds of attacks,” said John Miller, manager of threat intelligence for FireEye, a large cyber security company.
Proportionally, attacks on point-of-sale systems (as modern cash register systems are called) are down, according to the 2017 Data Breach Investigations Report by Verizon. This year they’ve made up just 6.7% of overall breaches tracked by the company, down from a high of 45.4% in 2011.
Even so, there are still lots of these thefts, in which criminals insert malicious software into a company’s point-of-sale (POS) system. The malware surreptitiously records credit and debit card information when customers swipe them through payment terminals. It later sends the card information to the thieves, who sell it on the Internet underground, known as the dark web.
These breaches continue to cause retailers and their customers headaches. In 2016, each stolen record cost retailers $172 to deal with, according to a study commissioned by IBM. In May, Target agreed to pay $18.5 million to resolve state investigations into the attack that affected more than 41 million of the company’s customer payment card accounts.
One problem is that many retail companies are slow to install software patches, even for known security problems, because they fear the patches might disable their POS software or terminals, causing them to miss sales.
That inconvenience is compounded by the increased frequency of these recommended security updates. While once companies might have gotten quarterly software updates, today they’re hit with a constant blizzard of them.
“Now we’re agile, we’re releasing something every week, or every day or even every hour,” said Ryan O’Leary, vice president of the threat research center at WhiteHat Security in Santa Clara, Calif.
While no system is 100% secure, most can be made much safer than they are. But not all retailers take the necessary steps. In fact, some wait to install known, but expensive, protective measures until they’re hacked.
“One they’re in the headlines, that’s when they invest the money, no matter how much pain there is,” said Ryan Olson, a threat intelligence director at cyber security firm Palo Alto Networks.
Consumers can try to protect themselves by looking for retailers that have enabled chip-based credit and debit card use on their POS terminals. These are much more secure than magnetic stripe cards.
When a customer swipes a card with a magnetic stripe, the POS machine sees the credit or debit card number, the card’s expiration date and the three or four-digit security code off the stripe. On a chip card, that security code is encoded as a dynamic cryptogram that changes each time the card is used.
This means stolen stripe card information is much more valuable to thieves, as it can be sold to create fake cards or used online. Without the security code — which the chip reader masks — the stolen credit card number and expiration date are worth much less on the dark web where thieves typically sell their stolen card data.
Unfortunately, only 44% of retail storefronts have chip card readers enabled on their POS systems, so customers still have to swipe the card’s stripe, even if it has a chip, said Mark Nelsen, a senior vice president of risk and authentication products at Visa.
As that changes, POS hacking will become less lucrative, because the information hackers can collect won’t be worth as much on the black market. Though FireEye’s Miller doesn’t see cyber thieves giving up until the last possible moment.
“Criminals know there’s a shrinking window for these kinds of attacks,” he said. “They make a lot of money off them, so they want to make as much as they can while they still can.”
With so many security breaches lately, many shoppers are wondering how safe their debit cards are.
It turns out there are some secrets about debit cards most users don’t know, and it turns out some of these cards are safer than others.
A debit card is a debit card, right? Not exactly. The consumer site Bankrate.com says some cards have more features –and more protections — than others.
– Some debit cards will help you look up a lost receipt, while others won’t.
– Some have a daily spending limit, cutting you off at $800 dollars, in order to protect someone from draining your account.
– Some debit cards will shut down with a change in your routine (like an unusually big purchase) as a protection from fraud.
In that case, if someone starts making multiple, big charges on the beaches of North Carolina….or in Los Angeles — when you don’t live there — the card may lock the account until you tell your bank you are on vacation.
How do you know what protections your debit card has? Just check with your bank.
While you are at it, make sure the bank has your cell phone number, so they can text you immediately if anyone makes a very large purchase on your debit card.
That way you don’t waste your money.
This morning on the way to work, I was listening to the Todd and Jayde morning show. One of members of the show, Annie, talked about how she believes that she was a victim of debit card skimming at a gas station. The result was that someone tried to steal $500 from her account and she couldn’t access any of her accounts online until the bank finishes investigating her case. Listening to the story, I had to look into the issue further myself and my conclusion is that you should NEVER use your debit card at a gas station. Do it the old fashioned way if you want that cash price, you have to use real cash over the debit card. Here’s why.
Skimming is a real problem and only getting worse
Last year Wisconsin issued a consumer alert warning that “skimmers” have been found at numerous gas stations across the state. A quick Google search reveals this happening in many other states nationwide. There are two types of skimmers, internal and external, but they both attempt to steal your card number and record your pin.
Why are gas stations a popular target? The payment terminals have minimal supervision so it’s pretty easy for someone to put a skimming device on without detection. With the potential for fraud in pay-at-the-pump transactions, it makes sense to go with cash or credit the next time you fill up.
“A consumer may likely have no indication that they used an altered dispenser until they find a discrepancy on their bank statements,” said Frank Frassetto, Division Administrator of Trade and Consumer Protection.
A study from FICO Card Alert Services reported a 70 percent increase in the number of debit cards that were compromised in 2016 at ATMs and at card readers used by merchants. Therefore this isn’t a problem that is going away.
The onus is on you
Credit cards generally provide you with more protection than debits cards. For credit cards, if your account number is stolen, not your physical card, you are not responsible for unauthorized charges under Federal Law. However, with debit cards, you must to spot the fraud and report it in short order. For debit cards, if your card and PIN have not been lost or stolen, you are not responsible for unauthorized charges under Federal Law if you report it within 60 days after your statement is sent to you. If an unauthorized charge goes unreported for more than 60 days, your money and future charges by the same person could be lost. If you lose your debit card or PIN, the time to report is usually much shorter (often 2 business days in order to limit your liability to no more than $50).
Given this scenario, it is unsurprising that banks have been replacing credit cards with newer, more secure chip cards because it is their potential liability; however, with debit cards, it is likely you have the old regular cards because the onus is on you.
There’s only so much time in the day, and being efficient with your finances can make room for what really matters.
In the video segment below, The Motley Fool analysts Nathan Hamilton and Michael Douglass asked one of the Fool’s credit card specialists for his top credit card tips. One smart insight is included below and it could help simplify your finances.
Michael Douglass: Let’s turn to No. 4. Dan Caplinger, who is a valued —
Nathan Hamilton: Long-time Fool.
Douglass: Yeah, longtime Fool. Hey, Dan. He suggested, talk to your credit card companies and see if you can get them to align the due dates for your payment cycles.
Hamilton: Yeah, I like this one. It’s an efficiency one for people who may be do hold multiple credit cards.
Douglass: Yeah, this isn’t something that’s going to make you a lot of extra money, but it can simplify the process and make your life easier, which is really a big part of this.
Hamilton: Yeah. When I asked him about one of his tips and he submitted this to me, I thought to myself, oh man, I have to do this as well, because my bills specifically are spread throughout the month. And it is a hassle to track all of them and make sure everything is paid. But if you have multiple credit cards, and you call up your issuer, most issuers I know of allow you to change the due date to wherever you please.
Douglass: Sure, as long as they get paid.
Hamilton: Yeah. So, calling up your issuer to do that and, say, put it on the 15th of every month, whatever date you choose, whatever works with your budget and how you like to have it set up, can absolutely simplify your finances. It’s a very useful tip that’s very easy.
Douglass: Yeah, and one of the nice things about this is, the way I often think about it is, let’s say you know you have $2,000 in credit card bills that are going to come to you at different parts of the month, and you’re making more than that, you’re pulling in more than that with your paychecks and all. But, if you aren’t managing when that cash is coming in versus when it’s going out, you could be in a position where you don’t have any money in your checking account, you’re overdrawn, and all that stuff gets ugly. So, putting it all together means you could be like, “Cool, by the 6th or the 15th or whatever, I just need to make sure that I have this amount,” as opposed to, “I have this amount by the 5th, and this amount by the 10th, and this amount by the 12th, and hopefully stuff comes in by the 14th.” That’ll make your life easier.
Hamilton: Living paycheck to paycheck, it’s absolutely important.
Are you considering which card to apply for?
The Motley Fool analysts Nathan Hamilton and Michael Douglass compiled a handful of helpful credit card insights from the Fool’s credit card specialists, and included one tip in the video about choosing a cash-back credit card or sign-up bonus.
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Michael Douglass: Tip No. 3 comes from Selena, who is one of our writers and great partners, she’s a longtime Fool. Don’t put off exploring cards that might be great for you, such as one that gets you 5-10% back on bonus categories spending, or one that offers a fat sign up bonus worth hundreds of dollars in travel benefits. Essentially, it’s the same idea that we have when we are approaching the stock market, which is, the important thing is to be invested now. That’s not arguing for market timing, it’s essentially saying, if you were in the stock market, that’s generally a better move than not being in the stock market, because long-term, things have historically tended to return a lot. So, our hope is that that will continue. In the same way, with credit cards, the best time to get started is right now, particularly with some of these that can really do a lot for you.
Nathan Hamilton: If you’re staying on budget, if you’re not incurring interest charges, if you’re paying your balances off monthly, it absolutely makes sense. Going back to our first point from Adam, where he mentioned Mint and Personal Capital, the last I recall, those apps allowed you to look at your spending categories and say, “I spend 60% on dining out, I spend 40% on gas.”
Douglass: Or junk food.
Hamilton: Yeah. But you can categorize it. Here’s where it makes sense for these bonus cashback cards. I generally look at it, when people ask me how many cards they should have, I say, normally, one to two. If you want to simplify your finances, keep it at one. If you want to optimize your rewards, two can make sense. But, back it up to what you see your budget is, and say, “OK, I can get a bonus cashback card, and this certain line item represents 80% of what I normally spend on a budget.” That’s where you can get the most use out of your time for earning rewards. Then, for the other card, get essentially a basic, flat rate card that is transparent, flexible, and works for everything else.
Douglass: Yeah. Let’s talk about a couple of the reasons why people tend to be a little bit shy a lot of the time about opening new credit cards. One of them is concern about their credit store. The issue here is, when you apply for a credit card, usually there’s a hard inquiry on your credit score. What that means is, somebody checks with the credit bureau whether you are creditworthy.
Hamilton: See how risky you are.
Douglass: Yeah, exactly. As a result, your credit score goes down a little bit. Usually not by a lot. We’re talking less than 20 points. But, a little bit, because it indicates that you’re looking to open up a new debt sleeve. So, that might make your credit appear a little bit riskier for somebody else if you try to open up another debt sleeve and another debt sleeve. So, people tend to delay because of that concern. Of course, on the flip side, it can actually be a benefit to your credit score longer-term.