Girl Scouts: A hotbed of fraud?

I got a call this morning from the Girl Scouts of Los Angeles. A staffer had tried to charge my American Express for our annual dues and donation, and the charge had been rejected. She tried again while I was on the line; same result.

A few minutes later I got an email from American Express emblazoned “Fraud Protection Alert.” I called the toll free number and identified the attempted charges as legitimate. Then I called the main number to ask why the Girl Scouts was suddenly considered a risky operation.

The rep first tried to blame it on the fact that there were “multiple transactions,” but she had to back off when I pointed out there were only two, and that didn’t explain why the first charge was declined. When I asked her if there was a way to get American Express’ overly vigilant fraud protection software to back off a bit, she said no.

As I wrote in “Big Brother is helping you?“, these programs flag about 20 transactions for every one that’s truly bogus. It’s up to the card issuer to decide how and when to follow through. American Express has obviously set its bar pretty low, opting to inconvenience and possibly embarrass customers rather than risk a loss.

A surprising number of people tell me they appreciate these alerts and blocked transactions. They feel like the card issuers are looking out for them. But the card issuers are really only looking out for themselves, since customers aren’t on the hook for fraudulent transactions if they’re reported promptly.

Issuers certainly have a right to try to protect themselves, and reducing fraud theoretically reduces costs for everyone. But they should find a way to do so without needlessly annoying their customers. Otherwise, we’ll take our business elsewhere. As I did. The charge using my Visa went right through.

How to survive financial infidelity

My latest MSN column “Is your spouse hiding debt?” highlights the red flags that may indicate your beloved is committing financial infidelity.

But what happens if you discover that’s the case? Can couples recover after one has lied to the other about debt?

The short version is yes, but it can be a rocky road. Here’s a message I got from one of my Facebook fans, who didn’t want to be identified:

My husband has always handled money poorly. When we began dating, he had several delinquent accounts and a repo. As we got engaged I took over managing our money and cleaned it all up. We got to a good place, but apparently the underlying issues were not addressed.

I routinely monitor our credit reports and I noticed an account I didn’t recognize on his. I asked him about it and he told me it was a business credit card from his job. It stayed on his reports after he left the job and he told me there must have been some mix-up where it didn’t get closed when he left. I asked after it periodically and he always said he’d get it taken care of. I assumed he was just procrastinating, as he was busy with his new job.

A little over a year later, I got a call at 8 a.m. from a collection agency about the account. He was away on business at the time and I was irritated with him for not dealing with it, so I decided to call and wake him and tell him about the collection call. At that point he confessed he’d kept the card as personal after he left his job and has been using it for “play money”–lunches out, gadgets, etc. He thought he could handle it himself and find some way to cover the bill on his own.

I was devastated. The money wasn’t a big deal, but it was such a betrayal–all the lies, feeling like a fool, and feeling like we weren’t on the same team at all about our goals and financial plan like I thought we were.

It was a hellish couple of weeks. I had to decide how I wanted to respond and he was terrified and ashamed. We had a lot of emotional conversations in the aftermath, and the only positive I can see out of it is that we knew each other a lot better after that. I ultimately decided to stay, but I was also very clear that it was a one-time thing. If it happens again we will be divorcing.

One of the outcomes of our discussion is that we started allocating much more money for personal use, something he felt he’d been lacking. I was ambivalent about it–it almost felt like rewarding him for what he had done–but in the spirit of trying to have an equal marriage where we both had a voice, I agreed. That was nearly two years ago and while we’ve mostly recovered, I’ve also realized I don’t think we’re ever going to be completely recovered. I’ve gotten to the point where I trust him about 90%, but I’m kind of stalled there. He’s a wonderful man in many other respects and I don’t regret staying, but I do grieve for having lost the ability to trust my husband unconditionally. I would caution anyone contemplating hiding money or an account from their spouse that it’s just not worth it. Just like physical infidelity. What indulgence they’ll be getting just isn’t worth the ultimate cost.

I think this account is instructive for a number of reasons. It shows how devastating a hidden debt can be on a deceived partner.

But it also highlights how both spouses can play a role in creating this situation. People, even married people, need some independence and freedom to spend money with no questions asked. Even when you’re working together toward important goals, such as saving for retirement and paying down debt, you need to carve out some cash for each person to spend without having to be accountable to the other.

I mention this because, as the money expert in our household, I have a tendency to think we should do things MY way. And that’s no way to run a marriage. My husband has his own needs, perspective and goals that are equally important. I’ve learned that compromise is essential to a happy marriage. Maybe we don’t save quite as much of our income as I’d like (although we do save a ton) and perhaps we don’t spend quite as much as he’d like, but we’re on track to meet our goals and (this is important) still enjoying our lives today.

Is the middle class an endangered species?

The headline of yesterday’s Wall Street Journal article was casually chilling: “As middle class shrinks, P&G aims high and low” (subscription required). The article talks about how Proctor & Gamble, along with other companies, are adjusting their business strategies to target a consumer market “is bifurcating into high and low ends and eroding in the middle.”

Even scarier were two paragraphs deep within the story:

To monitor the evolving American consumer market, P&G executives study the Gini index, a widely accepted measure of income inequality that ranges from zero, when everyone earns the same amount, to one, when all income goes to only one person. In 2009, the most recent calculation available, the Gini coefficient totaled 0.468, a 20% rise in income disparity over the past 40 years, according to the U.S. Census Bureau.

“We now have a Gini index similar to the Philippines and Mexico—you’d never have imagined that,” says Phyllis Jackson, P&G’s vice president of consumer market knowledge for North America. “I don’t think we’ve typically thought about America as a country with big income gaps to this extent.”

Wow.

Not that many years ago, it was controversial to even mention the growing wealth and income disparities in the U.S., even though all manner of economists and politicians–including then-President George W. Bush–were on the record as being concerned about it.

Today, the erosion of the middle class–and the supposition that it will continue to shrink–is no longer a controversial notion. It’s the basis of corporate marketing strategies.

Holy cow.

It’s well worth reading this thoughtful piece from the Atlantic Monthly, “Can the middle class be saved?” The author’s answer: maybe, but it will require more sensible economic, tax and education policies.

3 cool infographics, and 1 weird one

Sometimes complex information is easier to understand when it’s laid out for you in a cool, graphic style.

I’ve run across 3 pretty cool infographics recently that describe what you need to know about three important topics:

How to Dispute a Credit Card Charge (from CreditDonkey)

529 Plans: The Antidote to College Sticker Shock (from Mint)

Education Earnings: Economic Boon or Bubble? (from CreditDonkey, again; probably should have been titled “Is a college education worthwhile?”)

It’s worth spending time with each of these graphics–you’ll emerge smarter for the experience. The only caveat I’d add is about Mint’s effort: it’s not just the cost of college that will give you sticker shock. The amounts you’re supposed to save to cover 100% of the bill are pretty gargantuan, even if you start with a newborn and aim only to pay for public college (over $600 a month). So remember that you don’t have to try to save for the whole cost and that anything you do save will help reduce your child’s future debt.

Okay, now for the weird graphic…it’s a J.P. Morgan graphic explaining the European crisis using Lego figures. (Clicking on the link that says “Via Reuters” will download the full graphic, complete with explanations, since the legend provided isn’t really detailed enough to figure out what’s going on.) I’m not sure it’s possible to create a graphic that would explain this particular crisis simply, but this one sure isn’t it.

What to do if you get turned down for a credit card

Sometimes I’m introduced as “the woman who literally wrote the book about credit scoring.” (It’s called “Your Credit Score,” and you can find it on Amazon and wherever else fine books are sold.) My FICO scores are typically in the high 700s to low 800s. My credit record is so clean it sparkles.

And yet I’ve known the sting of being turned down for a credit card.

Beverly Blair Herzog has written a nice two-part piece for Credit.com (it starts HERE) about what you should do if you get that dreaded rejection notice. She focuses on the most likely reason you’ll get denied, which is that your credit scores aren’t up to the issuer’s standards. For example, if you have decent but not great scores, you may not be able to win some of cards that have the richest rewards programs. But you can still get a number of other good cards available to people with your scores.

Less often, an issuer’s policies will cut you off from the card you want. In my case, I’d applied for, and received, a British Airways card from Chase. When I applied for an Amtrak rewards card from the same company several months later, I didn’t think twice about it–but Chase sure did. The rejection letter I got, roughly translated, said “We’ve granted you enough credit right now, lady. These are risky times and we’re not sticking our neck out.”

Other issuers handle the risk proposition differently. For example: I’ve had an Optima card from American Express for years, but no longer use it. When I applied for another American Express card, the company gave it to me–with a nice big credit line–but chopped the credit available on my Optima card to $500. Since then I’ve applied for and gotten several other Amex cards without damage to my available credit lines, so the company must have decided I’m okay.

Card issuers aren’t going to spell out all their policies and lending criteria in advance–the card market is competitive and ever-changing. The issuer’s policies can change too. Witness card companies that were slashing credit lines during the recession. Now they’re stepping up their direct mail offers and introducing splashy new rewards cards.

The good news is that you don’t suffer “extra” credit score damage from getting turned down. The damage, usually five points or less, happens when you apply. Still, you don’t want to apply for cards if you won’t get them–the fewer hits on your credit, the better.

If your scores are less than sterling, you can reduce the possibility of rejection by researching which issuers are interested in your business, based on your scores. (Conveniently, that’s how Credit.com and other credit card sites help you search for card offers.) If your scores are really bad, you’ll likely need to start with a secured card.

But you can’t really know in advance when you’re going to stumble over an issuer’s hidden policy trip wire. So that brings us back to one of the Big Rules of Credit Score Improvement: “Apply for credit sparingly.” If you don’t ask, after all, they can’t turn you down.