During Capital One’s fourth quarter earnings call yesterday, CEO Richard Fairbank observed that, “the lack of consumer demand for credit, across our businesses, is striking.”  Given the behavior of credit card companies during the past year, however, the lack of demand for credit should come as little surprise.  Prior to the credit crunch, American consumers embarked on a massive spending spree fueled by cheap credit card rates, 0% APR balance transfers, and the willingness of credit card companies to extend significant lines of unsecured credit.  In 2009, many of these factors disappeared, taking with them the confidence of credit card users. Continue Reading »

Rising delinquencies on credit card loans are hurting banks, potentially leading to even tighter lending standards which, in turn, threaten to limit credit availability to a wider range of consumers and dampen our country’s economic recovery.  Yesterday, consumer credit bureau Equifax reported that new credit cards issued have fallen by 50% since July of 2008.  On the heels of that release, Capital One reported today that its annualized charge off rate rose to 9.77% from 9.32% in August, a fairly large step in the wrong direction at a time when more and more “experts” are signaling the Greatest Recession is nearing its end. Continue Reading »

During the past six months, we’ve been contacted by tons of consumers who’ve seen their credit limts cut, interest rates raised, or had a deadly combination of both.  These toxic credit card cocktails have been served up by most credit card companies and have hit consumers with good credit, solid credit histories, and high credit scores at random.   At present, the only credit card company that has not recieved a complaint is Discover Card.  Prior to that, Capital One was also on that list.  However, a recent comment from a visitor changed that.  This is what Pam had to say:

“Even though I have had a Capital One credit card for over ten years, paid on time, and paid more than the minimum payment at all times, I received notice from them that my interest rate would be tripling in May. I could accept this or close the account. In selecting to close the account, my attorney tells me that my credit score will be hurt. Is there any action I can take to mitigate the damage soon to be done? Apparently there is no regulation of this industry.”

Pam’s comment is the first word we have heard about this type of behavior at Capital One.  Hopefully, this indicates that Capital One will not be doing this too a lot of consumers.  However, the strategy here is the same we have seen from Chase, Bank of America, HSBC, and others.  Essentially, they give the consumer an offer they can’t refuse:  close your account or pay an absurd interest rate.  Ultimately, anyone who can’t repay their balance quickly has to accept the account closing.  Otherwise, they could see their balances double very quickly.

While it is unfortunate to hear that Capital One is raising interest rates and forcing consumers to close their accounts, this news is not surprising.  However, it might be a little too early to put Capital One on the wall of shame, as this is the first complaint we’ve recieved about them.

However, if you’ve had your credit limit decreased by Capital One, please leave a comment so others can learn of new developments.

Also, if you have your credit limt decreased recently, you may find this article on What to do When Your Credit Limit is Cut useful.

In J.D. Power’s annual ranking of credit card companies, Capital One has historically lagged behind the pack.  In fact, Capital One came in second to last amongst major credit card issuers in 2008 (and 2007), garnering two out of a possible five stars in every category (see 2008 J.D. Power Rankings for complete details).

As part of the research process for Smart Balance Transfers, I personally test many credit card issuers by applying online for one of their credit cards.  Generally, these tests go well.  Such was not the case with Capital One.  In fact, my test of Capital One’s customer service turned into an aggravating three week process.  Today, after yet another frustrating encounter with Capital One’s customer service department, I put my “No Hassle” card in the shredder.  Below is a step by step recounting of my Capital One customer service experience:

1.)  Applying Online:  The online application process was the only easy part of getting a Capital One credit card.  From start to finish, the credit card application took about five minutes.

2.)  Activating the Card:  About ten days after applying, my card arrived in the mail.  I called up the activation number and had my first experience with Capital One’s customer service department.  It was not a good one.  Customer service, as far as I understand it, exists to serve and assist customers.  At Capital One, confusion and aggravation seems to be the M.O.  The representative I spoke with sounded like she was talking through a broken walkie talkie.  I couldn’t understand her and repeatedly had to ask her to repeat what she had just said.  Apparently, her phone line wasn’t very clear as well.  I had to repeat myself, well, repeatedly.

There were two big problems with this customer service experience.  First, the telephone connection was horrible.  More importantly, however, the representative, clearly located in an overseas call center, spoke poor English and understood English even less.  A call that should have taken three minutes took close to ten.

Ultimately, I activated my card, but got off the phone frustrated.  At this point, Capital One was about to fail my, “Mom test.”  The “Mom test” is pretty straightforward.  If I think a credit card company provides competent customer service that my Mom would have no issues with, they pass.  If I think a credit card company would confuse, complicate, or frustrate my Mom, they fail.  Capital One was on the brink.

3.)  Using the Card:  I made a small purchase online after activating my Capital One card.  Fortunately, I did not leave the house with only this card in my wallet or try to use it soon after, because a week later I got a letter in the mail stating that my card was on hold due to potentially fraudulent activity.  The letter stated that I needed to send in a copy of my driver’s license, social security card and a utility bill.

Annoyed, I spent the better part of an hour trying to locate my social security card.  Ultimately, I gave up and called them.  Again, customer service sounded like they were on the other end of a cup with a string attached.  And again, when I could hear the customer service agent, I couldn’t really understand her English.  This call to Capital One customer service lasted about ten minutes, involved two agents who spoke poor English, and ultimately ended up with my issue resolved.  However, had I needed to use my card, I would have been unable to for close to ten days. 

The communication issues, coupled with the fact that activating my card ultimately took three weeks, has led me, like J.D. Power, to give Capital One a big thumbs down on customer satisfaction.  Not only would I not recommend this credit card company to my mother, I wouldn’t even recommend it to a third cousin I didn’t particularly like.

If you have had similar experiences (or positive ones), please take a moment to share your thoughts by posting a comment.  Your feedback helps Smart Balance Transfers provide consumers like you with the information they need to avoid credit card hassles (pun intended!)

While the subject of international credit card transaction fees is a little off topic, we thought this info may be useful to people travelling abroad over the holidays.

Essentially, almost every credit card company charges a foreign currency transaction fee of 2% to 3% for every purchase made abroad.  However, Capital One is the sole major credit card company that does charges no international transaction fees.  American Express only charges a 2% foreign transaction fee, but outside of your hotel and major locations, there’s always a chance your card won’t be accepted.

Many people are unaware of international transaction fees, as credit card companies bury this information in the fine print.  However, some people who are aware of these fees often opt to use their debit cards instead of a credit card.  This can lead to some unpleasant consequences.

One of the main benefits of using your credit card for international travel is fraud liability.  If your card is lost or stolen, you can get a new one sent to you and the money spent fraudulently will generally not effect your available credit.  However, if your debit card is stolen and misused, the money spent will be deducted from your available balance, and you may end up waiting weeks for the money to be available in your account.  Obviously, this can be a huge problem, especially if you need the cash in your bank account.

Because of the issues that can arise when using your debit card for international transactions, the best option is to use a credit card with no international transaction fees.  However, if you don’t have time to get a new credit card that doesn’t charge fees, it is worthwhile to pay foreign transaction fees so you can have piece of mind.

Because offers change frequently, please see www.capitalone.com for information on this subject.

In total, Capital One offers five No Hassle Miles airline rewards credit cards. Two of the no hassle miles cards are targeted to regular consumers.  A third card is for “Proffessionals”.  The remaining two are for businesses.

First, we’ll begin with the consumer offers.  Essentially, the primary difference between these cards is the credit quality of the consumer.  Consumers with excellent credit can get a lower APR than those whose credit Capital One deems to be good.  However, the no hassle rewards offer is the same for both cards.  First, the cards offer 1.25 miles for every dollar spent, which allows you to earn miles 25% faster than with most standard airline rewards credit cards.  Second, the card allows you to use your miles on most airlines with no blackout dates and no seat restrictions.  Finally, both no hassle cards have no expiration dates on the miles you earn.  This is an important plus, as many frequent flyers have seen thousands of miles evaporate via the short term life of miles with many airlines. 

Businesses, like consumers, have more than one No Hassle Miles option.  There are, however, two distinctions.  The first is in the miles.  With the  Capital One® Business Platinum with No Hassle Miles(SM), one mile is earned for every dollar spent.  With the Capital One® Visa® Business Platinum with Double No Hassle Miles(SM), two miles are earned with every dollar spent.  Besides the mileage differences, the interest rate terms vary between cards, with the standard card offering a substantially lower APR.  However, businesses that pay their balances in full every month can benefit substantially with double miles on every purchase.

Sources:  www.united.com, www.americanairlines.com, www.capitalone.com, www.americanexpress.com

Time to say goodbye to David Spade and say hello to the crazy credit card guy.  Capital One has recently begun an advertising campaign for its Capital One Card Lab, an online tool that lets consumers build their own credit card…kind of.  Consumers with excellent credit card will be able to get a credit card as designed.  However, people who are unsure of their credit or have lessor credit than they percieved may get something slightly different than what they created in the card lab.

For this review of the Capital One Credit Card Lab, we’ll assume we have excellent credit, which gets us through the first step of this 4 stop process.  Step two is where things get a little complicated.  On this page, you are able to choose your interest rate, your introductory interest rate and your rewards.

In an attempt to build the best rewards credit card available, I selected to get 1% cashback on purchases with a special 2% intro rate for 12 months.  After selecting this, a number of options were removed, including every possible APR below 15.9% and a 0% on balance transfers.  I then chose to get a 0% APR on purchases for 1 year.  The result:  the only available interest rate was 19.9%. 

Ultimately, the card I created was not nearly as good as a number of cashback credit cards already on the market.

Disappointed, I tried the Capital One Card Lab again.  This time, I designed a card for someone with good credit.  The results were equally unsatisfying.  I opted to get a 0% APR for 9 months on purchases (the longest available duration), a standard 1% cashback reward option and was ultimately offered a card with a 18.9% APR.  Compared with other offers on the market for individuals with good credit, this lab creation was a complete dud.  There are probably 30 other credit cards available with better terms.

The Capital One Card Lab is graphically impressive and fun to play with.  But choosing a credit card is not about having fun.  While some people with excellent credit may be able to create a card that offers good rewards, individuals who don’t meet Capital One’s harsh criteria for excellent credit will find much better deals elsewhere.