FOOL'S EYE VIEW
Credit Cards are Evil!

By Jane Mack (TMFJane)
August 10, 2001

No, no, no – of course credit cards aren't evil. The headline was just to get your attention (in the same way that credit cards grab your attention by headlining low interest rates without giving equal prominence to the catches hidden in the small print)!

I was reading a fascinating discussion on this very topic on our US website the other evening and was interested to find quite a lot of Fools sticking up for credit card companies. Many pointed out that such companies have to put up with quite a lot too!

The theory posited was that:

• They like to take advantage and exploit as many people as possible for profit.
• They are very shady when it comes to their marketing tactics and business practices.
• If there weren't laws against it, they would adopt practices that would put loan sharks out of business.

Clearly this comes from someone who's had a bad experience. Credit card companies have just as much right as anyone to try and make a profit and the laws governing their rights and responsibilities are really quite strict – and, in the UK at least, they're about to get stricter.

As for consumers, many of us are becoming savvy enough to look for the cheapest interest rates and are getting quite shameless in our willingness to transfer our loyalties at the drop of a hat. And we should remember that it's up to us to ensure we understand what we're signing (even if credit card companies don't always make it easy for us to understand the terms), as well as making sure that we don't overstretch ourselves when use them.

We also have various methods of protection under current consumer credit laws, which grant us cooling-off periods and, in many instances, cover us in the event of fraud. In this last instance, it's usually the card companies that get clobbered and it's a crime that's on the increase. Recent figures published by Europay International show that card fraud is up by 55% -- jumping from £188.4 million in 1999 to £292.6 million in 2000.

About a third of this comes from counterfeit cards, which usually involves a practice known as "skimming". This is where your card is swiped in machines that copy the data on the magnetic strip so that the information can be reproduced on a fake card. Companies are fighting back with the use of holograms and special chips but the latest idea is to introduce a PIN number at the point of sale.

Another third of all credit card fraud comes from lost or stolen cards where the use of the card tends to be opportunistic rather than organised. Again, PINs are planned to counteract this problem but it's not going to be a final solution.

Apparently, the vast majority of fraud from cashpoint machines occurs because the cardholder has written down their PIN and has kept it with their card in a purse or wallet that is subsequently lost or stolen!  It would help if consumers weren't so careless so here are some tips:

• Guard your cards. Don't let them out of your sight in shops or restaurants, and never leave them unattended.
• Don't keep your PIN numbers with your cards. In fact, try and memorise them – and never disclose them to anyone else.
• Keep your receipts to check them against your monthly statements so that you can report any transactions you don't recognise.
• Report all instances of lost or stolen cards immediately.

One thing you could do right now, if you're near a photocopier and you have your cards with you, is to make a copy of them, front and back. Keep this in a safe place (not in your wallet!) so that, if you do manage to lose your cards, you have an instant record of the information you'll need to pass on when you report the incident.

Credit card companies aren't perfect, I grant you, but then neither are we. Sometimes they have to deal with consumers who've either been careless with their spending, or with the cards themselves – and it's the companies who often have to take the rap.

More: The Fool's Credit Card Centre