How to Handle Being Carded at Checkout with your Credit Cards?

Have you ever been at the grocery store or at the mall when a retailer asks you for your identification? I know this has happened to me hundredes of times in my life. Practically any time I go into a retailer store I am asked.

Did you know that Mastercard, Visa, and Discover forbid retailers from requiring an additional form of identification with a signed credit card? And that American Express strongly discourages the practice? Well, neither did I until I read a recent snippet on privacy in my June issue of Money Magazine.

I did not quite trust the article, so I checked out the Mastercard and Visa merchant manuals to verify (text below) and no doubt -- it is right there in plain English. To be clear, merchants can ask to see your identification, but with your refusal to provide it, they cannot prevent you from completing the purchase as long as you have a signed valid card. It is within your rights refuse to provide your drivers license or other identification. Of course, unless this information is required to complete your purchase -- say you are shipping an item.

Why is this important? Credit card fraud is the biggest reason. If a merchant is able to obtain your credit card number, expiration date, security code (CID), and the address and zip code information -- that is more than enough to commit several types of identify theft and / or credit card fraud. By not providing your information on the drivers license, you prevent those critical pieces of information required to commit fraud from getting into the hands of the criminals.

You may think, wait a second -- how quickly can they remember all of that information, and in many cases -- you are right. It is somewhat difficult while you are standing there to capture all of your details. However, all the questionable individual needs to do is remember that 5-digit zip code from your ID. With your credit card swipe -- they have everything else they need as most vendors verify the Credit Card number, the expiration date, the CID, and the billing zip code with purchases.

So, the moral of the story is to be careful of who you give your drivers license to and think twice the next time a merchant asks for identification! While there are two schools of thought here, to me it is clear that the overall damage that someone can do with with the complete information is much higher and time consuming that dealing with the loss or charges on one credit card.

How serious of a problem is this? Serious enough to the credit card companies that they have setup phone hotlines and in some cases even online forms! For Mastercard you can either call 800-MC-ASSIST or go online here. For Visa, call 800-VISA-911. And finally, for Discover Cards call 800-Discover. In many cases they will either convince the merchants to accept your card without identification or write up the vendor for an agreement violation.

From the Mastercard merchant manual on page 48:

9.11.2 Cardholder Identification A merchant must not refuse to complete a
MasterCard card transaction solely because a cardholder who has complied with the conditions for presentment of a card at the POI refuses to provide additional identification information, except as specifically permitted or required by the Standards. A merchant may require additional identification from the cardholder if the information is required to complete the transaction, such as for shipping purposes. A merchant in a country or region that supports use of the MasterCard Address Verification Service (AVS) may require the cardholder’s ZIP or postal code to complete a cardholder-activated terminal (CAT) transaction, or the cardholder’s address and ZIP or postal code to complete a mail order, phone order, or e-commerce transaction.

And from the Rules for Visa Merchants, Page 29.

Requesting Cardholder ID:
When should you ask a cardholder for an official government ID? Although Visa rules do not preclude merchants from asking for cardholder ID, merchants cannot make an ID a condition of acceptance. Therefore, merchants cannot refuse to complete a purchase transaction because a cardholder refuses to provide ID. Visa believes merchants should not ask for ID as part of their regular card acceptance procedures. Laws in several states also make it illegal for merchants to write a cardholder’s personal information, such as an address or phone number, on a sales receipt.

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What is this house really worth?

Good question. I was reading this month’s (March, 2008) copy of Money Magazine and came across their monthly home renovation article entitle Stoop Conquered (no link yet, but here is the main page) by Kate Ashford. In the article, it showed a house that was purchased a couple of years ago in Evanston, city just north of Chicago by the Sheikh’s for a total of $956,000. After the family moved in, they spent $200,000 upgrading the home in several different areas, redoing the front yards, adding a porch and upgrading areas of the interior including the bathrooms. The article now “valued” the home at a whopping $1.2M.

Something about the appraisal of $1.2M just did not sit right with me, especially in 2008. Yes, the family derived a lot of personal value out of the upgrade and has a much more livable space to call home. But the emphasis in the article was the increased value of the home, not the increased value in the family’s home life. Had the article been written in 2006, my response would have been – par for the course. But in today’s house market, that valuation – while it may feel good for the family – seemed preposterous.

My curiosity took a hold of me, I had to investigate.

Given that both the full name of the couple and their specific Chicago suburb were provided, I took a quick spin on Yahoo’s people search to see if their address would come up with the basic information in the articl. To my surprise, their information returned with unexpected accuracy. I had all the information needed to take the new step.

I turned to the trusty Zillow website, what has become a standard for a lot of people in terms of a gut feel on the valuation of the home. Their formula is based on a number of factors including recent comparable sales (comps), upgrades, and other assessed information on your home. In reality their estimates are usually surprisingly accurate.

After popping in the address information obtained from Yahoo’s people search, the Sheikh’s house showed up on Zillow. After checking out the bird's eye view from Microsoft Virtual Earth, I was able to confirm that the house in the picture was the same as the home featured in the Money Magazine article. Looking at the particulars and comparable sales – it seemed to be inline with the features added, and the local area.

However, what was the Zestimate or the estimated value of the home? Shocked, it was only $964,000 – about $250,000k lower than what the article stated the market value of the home as of "today". This confirmed my suspicions that the Money Magazine article was way off in their presentation of the facts on this story. Not to mention, the Zestimate suggests that the property topped out at a total of $1.09M – not the $1.2M that Money Magazine suggests.

A few lessons learned here:
1. You cannot trust everything that you read in magazines. This is a case of an author not cross-checking their facts. I am speculating that this article was produced some time ago and the facts were not re-checked – or they were never researched completely.
2. Just because you spend $200,000 on upgrading you house, that does not necessarily mean that amount will be added to the value of your home. Many times, it is not – especially if you overpaid for your house in the first place.
3. When you volunteer to take place in any sort of article, there should be very little expectation of privacy. It was amazing with just a couple of simple facts provided in the article how quickly I was able to locate the details and physical address of the home presented.

In the end, does it really matter? Not if the Sheikh’s are happy with the home they live in and can afford it. The other side is that if you are enhancing your home simply to increase the value of it –- then you are doing it for the wrong reasons.

Finally, to Money Magazine – please check your facts before you publish articles that are so inaccurate and misleading.

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American Express Hilton HHonors Card – The Best Rewards Card Out there.

There is a debate that rages on about what the best reward card is out there. Some argue that cash back is the way to go (such as the new American Express Plum card). Others believe that flexible rewards are the way to go. Both sides give very good reasons, but there is one card that stands above them all, the American Express Hilton HHonors card. Especially when you actually measure out the rewards.

For some time the American Express Hilton HHonors card has been heads above all others in terms of the overall value of your rewards. For that reason, I will argue that if you do any traveling at all, the American Express HHonors card is by far the best way to go. Here’s why:

We need to remember that it is not only about the points that you acquire. That being said with the American Express Hilton HHonors card, you get 3 points for every dollar that you spend on the card minimally, an additional 2 points per dollar (for a total of 5) for special items like groceries, gas etc., and additional 5 points per dollar (for a total of 8) for any dollar that is spent within a Hilton property – whether for business or pleasure – when you use your card.

Of equal importance to me is that with this card, there is no annual fee while it still has a lot of the other great American Express features and protections.

Let’s now take a look at how the American Express Hilton HHonors measures against its closest competitors. I will run the math for you, so you can see why it is so much better. The scenario here is that when you have spent roughly $70,000 on your credit card over a couple of years for comparison sake.

Airline Cards – Like United’s Mileage Plus
If you take the instance of the United Mileage Plus credit card’s 1 mile per dollar spent it gives you a total of 70,000 miles, or enough to purchase two United Airlines flights to Hawaii with a saver award. This equates to roughly a $1,400 in value – more or less depending on the time of the year.

Cash Reward Cards – Like the American Express Plum
If you take the instance of cash rewards cards such as American Express Blue or Plum, you can assume a high-end cash back percentage of 3%. The math here is a simple $2100 cash back to you, slightly better than the United Mileage Plus type card.

American Express’ Hilton HHonors Card
Now let’s look at the Hilton HHonors American Express card. If you get 3 points for every dollar (conservatively), that equates to 210,000 HHonors reward points. For 175,000 points, you can get a 6-night stay at a resort like the Hilton Hawaiian Village in Hawaii. With a standard rate of $300 a night, plus $30 in taxes, that is a value of $1,980 – already better than the cash back. However, let’s look at it further. If you spend over 25,000 a year on your American Express Hilton Hhonors card, which means you are automatically upgraded to Hilton HHonors Gold VIP status. What does that mean? Well, you not only get free breakfast each morning, but you will get a room (99% of the time) from your standard reward room. Our last trip to Hawaii ended up with a suite on the 27th floor of the Diamond Head tower, a $700+ a night room. Let’s redo the math. $770 (w/ taxes) a night, plus $20 a person for the free breakfast. What does that come to for just two people? A total value of $4,860.

Wow, that is almost $5,000 in value – way more than double any other opportunity out there. Even better, both the calculation of points and the spending of the points were conservative. If you qualify for point stretcher rewards, that same stay will only cost you 144,000 points! Still even in the above scenario have 35,000 or more than 15% of your point remaining still.

Hopefully my arguments here put an end to any debate that you might have seen. The is no question that point for point and dollar for dollar, the American Express Hilton HHonors card is the best rewards value out there. The only catch? You have to be a fan of the Hilton chain with their thousands of properties around the world. Luckily for me, I am.

Disclosure: I use my American Express HHonors card almost exclusively for everything I purchase. Because of that, I have not paid for a hotel room on vacation for 5 years -- that includes my upcoming trip to London and Paris.

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Yes or No? Leveraging Interest Free Credit Card Transfer for Free Money

I will admit it; I am pretty particular about my beliefs and research when it comes to personal finance. There are a ton of sites out there that want to tell you how you can make money, or better yet – make the money you have work better for you.

As I mentioned a few weeks ago, I follow the MyMoney Blog through Google Reader, scanning some of the article, of which sometimes I find some value that keeps me reading. One thing that continues to alarm me from Jonathan's posts are his use of Credit Cards to generate "interest free" investment capital of the 20k plus he has on cards by leveraging the free interest offers that several credit card companies offer.

Jonathan mentions that it may be alarming the amount of credit card debit he has, but then explains his reasoning for his decision to use it. I will admit, it does sounds good – who does not want free money raise their hand – no one! However, I entirely disagree with Jonathan about the level or risks associated with this "free money" tool and believe its use should be a rarity.

In fact, in his situation of trying to purchase a new home, one would think it could be particularly damaging. When you lay it out, a 3% gain of $600 a year after tax (assuming leveraging a high-yield savings account) versus the risk of negative impact just does not seem worth it.

Here are some of the reasons why.

1. Credit Cards continue to offer free interest on balance transfers. This is a huge assumption that this play makes. Let's say that 6-months from now research shows that the free interest offers do not increase the lifetime value of the customer. Credit card offers of free transfers dry up and six months later you have a huge debt to pay off or you now pay interest on a monthly basis that quickly exceeds your potential gain.

2. What if you miss a payment? Do you ever go on vacation? Have you ever been late on a payment? Ever have an emergency? If any of those happen to you then your interest rate on that entire stack of money jumps to 21% or higher. In two months you've lost more than you could have made in the entire year, actually putting you in the hole for something that you wanted to make money.

3. Want your credit score to take a hit? Well, it is a proven formula, open up lots of credit cards and use up large portions of your available credit and you score will go down – even if you always pay your bill on time. Looking to buy that first home?

There are a few others which I am not even covering here. Basically, the summary is this: Can you use interest free credit card balance transfer to increase your income? Yes, you can – however, the risks associated with it strongly outweigh the benefits. Especially since there is a coming climate change in the marketplace that will threaten such offers.

How many people have obtained their financial goals by loading themselves up with five or six figures of credit card debit? You already know the answer to that.

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Bank of America, My Money, and New York City

Odd subject, interesting story. This past weekend I was using the Bank of America - my core bank that I use for a number of my financial transactions. I use their moneycenter application -- also known as their My Portfolio service to track a number of items.

Recently, it has been riddled with errors when trying add a new account. The kind of errors where every link I click on returns a technical error. As expected, when I report them to the customer service -- form emails are returned to me without answering the question I have. Rather they point to me as having an issue using the site.

Fed up, I did a little of Google searching to see if anyone else was having similar issues with their My Portfolio service. While I did not find anything in terms of the problem, I did come across the My Money Blog and an article that has no revelance to my issue, but was intriguing none the less.

The ficticious? Manhattan poster made a Craiglist post that was similar to the following:

Okay, I’m tired of beating around the bush. I’m a beautiful (spectacularly beautiful) 25 year old girl. I’m articulate and classy. I’m not from New York. I’m looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don’t think I’m overreaching at all.

The rest of the article covers treating marriage as a business relationship. Interesting theory read, impractical and undesirable circumstance from my perspective.

I spent a little more time around the My Money Blog and found it to be relatively engaging. The 29-year old Jonathan who has been blogging about his experiences in creating his financial future over the last three years.

While I do not agree with all of the approaches and strategies he used, you're bound to find some valuable information and insight there. I may comment on a few of them that I consider to be either risky or a waste of your time. Stay tuned.

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