This nifty arrangement is the pay-per-call, 900 number telephone services. Here's how it works: The long distance company provides the telephone number, and billing/collection services. Another firm, separate from the phone company, provides the information services, sets rates, and handles all the marketing. Consumers using the service are billed on the monthly statement from the local phone company. Profits are then split between the firms.
Most 900 calls cost around $2.00 per minute, but many charge flat fees ranging from a few dollars to nearly $50.00. Services offered include dating lines, game lines, entertainment lines and sports lines. However, the most popular service offered is financial or business information and this includes credit cards.
While some 900# credit card marketers make legitimate offers, many abuses are surfacing. For example, referring callers to another 900# with still higher charges, putting callers on hold, deliberately repeating information to consume more time, hanging up in the middle of the call and/or charging a high flat rate but delivering worthless information. Other 900# abuses include misleading consumers to believe they will receive a major credit card like VISA or MASTERCARD, without a credit check, that turns out to be some obscure catalog credit card or charging $20 or more for the names of three or four banks offering cards with low interest rates.
The popularity of 900# credit card services has obviously grown. For example, during December our staff received several 900# postcard solicitations. You may recognize some of these seemingly legitimate offers:
2. National Credit Center (FL) promises a guaranteed and pre-approved gold card with a $5,000 credit limit if you call 900-535-8990. The catch is: the call costs $1.95 per minute and the gold card is a catalog shopping card from National Credit Savers (AR). Cardholders are required to make downpayments on all catalog purchases, with most merchandise offered a suggested list prices. Like other catalog cards, the N.C.S. GOLD card has very little credit building value since it is not reported to major credit bureaus. The solicitation also offers a secured VISA/MASTERCARD from New Era Bank (NJ).
3. A.H.S. Credit Card Services (NY) is promoting a $10,000 line of credit (at a 12% APR) expandable to $15,000, with no credit check, if you call 900-988-2937. The catch is: the call costs $3.95 per minute and the line of credit is on catalog card called ELITE. Like other catalog cards, the ELITE card requires downpayments on purchases, no acceptance beyond the catalog and is not reported to major credit bureaus. The solicitation does offer an opportunity to apply for a secured card from an unnamed bank.
4. First National Bancard (CA) promises a pre-approved $2,500 credit line expandable to $5,000 if you call 900-230-0001. The catch: the call costs $1.95 per minute and the credit line is a catalog shopping card called: COURTESY EXPRESS. The card has the same limitations as the other catalog cards mentioned. The solicitation also includes the opportunity to apply for an unspecified secured major bank credit card.
5. Credit Processing Center (GA) offers a $1,000 "fast cash" grand prize and a pre- approved $3,250 credit line if you call 900-535-4242. The catch is: the call costs $1.95 per minute, the odds of winning are one in 100,000 and the credit line is on another catalog shopping card called PREMIER UNIVERSAL. The card functions exactly like the previously mentioned catalog credit cards.
Finally, the worst example was a postcard from United Productions Inc. (NV) informing the addressee of approval of a $5,000 credit limit if you call 900-468-5800. The solicitation contained no other information except that the call costs $1.95 per minute. Instead "Final Attempt", "Urgent Notice" and "Respond Immediately" were plastered across the card.
Some states, like California, regulate intrastate 900 services through the state's Public Utilities Commission. However information providers utilizing 900 phone numbers from out-of- state are not subject to state regulation. Until federal lawmakers establish disclosure rules and otherwise regulate 900 telephone services it is best to avoid them if it involves credit cards. If you were a victim of a 900# abuse we encourage you to contact your federal representative and if it involved direct mail solicitation you should complain to postal authorities too.
For consumers it is best to avoid calling 900#s for credit card information. We have yet to come across an offer involving credit cards that, in our opinion, had any real value. This newsletter provides more than adequate information on locating a secured card or a bargain card. If you stumble across a good 900# deal please let us know.
In other news . . . American Express raised the interest rate on its OPTIMA card this month to 16.75%. The rate was based on the prime rate plus 5.75%. The new formula, effective January 1, is prime plus 6.75%. The rate for cash advances also increased from 18.00% to prime plus 8.9% or 18.90%. AMEX is testing marketing the OPTIMA card to non- American Express cardholders and it is likely the company will offer the card nationally before years' end. However you can bet the annual fee will considerably higher than the current $15.00.
There are strong indications the prime rate may drop this month to 9.5%. Unfortunately, most variable rate issuers adjust rates quarterly which means credit card rate reductions will not be passed on until April. If the prime rate drops much further do not be surprised if many issuers revise rate formulas upward.
