Monday, March 2, 2015

Credit cards, Facebook, and 'returnaholics'

The Federal Reserve tries to help credit-card users. Facebook and its critics try to help the privacy-minded. And retailers try to counter a pernicious form of theft.

Credit cards, Facebook, and 'returnaholics'

I've been away a few days for a daughter's college graduation, dorm move-out, and other intrusions of everyday life, but I wanted to pass along a couple of updates on ongoing stories, as well as a link to an article about a practice that I've always wanted to believe was 90 percent urban myth: people who cheat retailers by buying items, using them, and returning them for refunds.

(1) I wrote last Sunday's column about the first anniversary of the Credit CARD Act of 2009 - a milestone worth celebrating even if some card issuers used it as an excuse to raise rates pre-emptively on good customers. The column (read it here) focused on one cardholder, Robert Malkin, who pays off his card each month and was miffed - to put it mildly - that Capital One had more than doubled his interest rate.

The good news, as I explained, is that the credit-card market remains very competitive, and that the banking industry's dire warnings (everybody will have to pay annual fees! no more rewards!) haven't materialized. Customers like Malkin may not find long-term 6.9 percent rates anymore, but rates in the 10 to 12 percent range are available, as are balance transfers with attractive terms. So anyone with a decent credit score may benefit from shopping around.

Why would a convenience user like Malkin even care about his rate? Several readers asked that question, so maybe I didn't explain the answer well enough: They should care for the same reason that Malkin's rate matters to Capital One even though he hasn't paid any interest for more than a decade.

Basically, Capital One can't predict that Robert Malkin himself will ever carry a balance. But it can predict that among 1,000 Robert Malkins, some fraction - say, 100 or 200 - will break ranks during the next couple years because of an unexpected event such as a job loss or large medical bill. Malkin knows this firsthand - a credit card helped him survive financially after a layoff during the 1990s.

If you someday might have to carry a balance, wouldn't you rather do so at 10 percent than at 16 or 20 percent? And a great feature of the Credit Card Act is that it finally outlawed the great bait-and-switch of credit cards: lending money to cardholders at one rate, then switching them to a higher rate once they've built up a balance. Now, if you use your card to borrow money, you can predict what you'll owe in interest.

The update: On Monday, the Federal Reserve fulfilled one of its obligations under the new law, by introducing a new database where consumers can compare credit-card terms. You can find it here, and I'll be curious to hear what you think. It's not exactly the most user-friendly design, but it's a good reminder of how complicated card contracts remain  even after last year's reforms. The Fed also offers a very useful Consumers Guide to Credit Cards.

(2) Facebook continues to rankle users with its new approach to what used to be called privacy.   Here's a link to a live blog on Facebook's announcement of its latest changes, and a critical review of the changes from Consumer Reports' Electronics Blog. You might also want to read the reaction of the Center for Digital Democracy, one of many critics of Facebook's Alice-in-Wonderland approach to privacy. And here's the take from the horse's mouth: Facebook founder Mark Zuckerberg, who calls the new approach Making Control Simple.

Facebook was a lot simpler when it wasn't trying to be the Social Network that Ate the World. (I wish I could lay claim to that phrase, but I have to credit Time magazine's Lev Grossman and his 2009 piece, Why Facebook Is for Old Fogies.) I've never really succumbed - probably because the aforementioned college student/graduate convinced me years ago that Facebook really wasn't for old fogies. Isn't that Facebook-is-for-everyone ethos really at the core of its privacy dilemma?

Facebook deserves a lot of credit for countering the Web's culture of anonymity. It's refreshing, for instance, to read Facebook members' making political comments using their actual names rather than pseudonyms. (See Facebook's  Scott Brown page to see how real people make signed and mostly civil comments, even when they're angry.) But there's a tough balance to strike here, and Facebook-is-for-everyone may undermine it.

(3) "Returnaholics": WalletPop.com's Mitch Lipka (my former Inquirer colleague) details some of the latest complaints here about these bad-faith buyers, who notoriously buy fancy dresses before the Big Prom or Big Party, or giant TVs before the Super Bowl.  If you're a data geek or policy wonk, you can see the National Retail Federation's 2009 report on this phenomenon and its costs here.

Do you know anyone who's ever done this? Do they really think it's any different from other kinds of theft? There are plenty of legitimate reasons to return an item you've purchased, but "I no longer need it" isn't among them.

 

Jeff Gelles Inquirer Business Columnist
About this blog

Jeff Gelles, who writes the Inquirer's weekly Consumer 14.0 and Tech Life columns, takes a broad look at the marketplace of goods, services, and ideas.

Reach Jeff at jgelles@phillynews.com.

Jeff Gelles Inquirer Business Columnist
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