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Cardholders Caught In Credit 'Trap': Report
http://www.foxnews.com/story/0,2933,292872,00.html ^ | 8-10-07

Posted on 08/11/2007 6:39:42 AM PDT by Hydroshock

WASHINGTON — A "dangerous cycle of debt" is trapping too many credit-card holders, making it increasingly difficult to protect their financial security, according to a report.

About one-third of cardholders pay interest rates in excess of 20 percent, according to a report from New York-based think tank Demos. Also, borrowers with one slip-up can incur a "cascade" of penalties and end up in a "trap" of high-cost debt, the report said.

"The excuse of risk-based pricing is used to justify everything. These prices go far beyond pricing for risk. Some of these interest rates and payment fees seem to not accurately reflect the risk," said Tamara Draut, a co-author of the report.

Draut criticized practices such as card issuers retroactively applying rate increases. The authors also noted that companies can change terms at will, and that there are no legal bounds to the amount of fees and interest that borrowers can be charged.

"As a result, cardholders often borrow money under one set of conditions and end up paying it back under a different set of conditions," according to the authors.

(Excerpt) Read more at foxnews.com ...


TOPICS: Business/Economy; Miscellaneous; News/Current Events
KEYWORDS: credit; creditcards; debt; debtbad; onetrickpony; personalfinance
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To: Moonman62; Hydroshock
You seem to know a lot of people who support your narrow view of the world.

Matthew 7:13-14

The Narrow and Wide Gates

13"Enter through the narrow gate. For wide is the gate and broad is the road that leads to destruction, and many enter through it. 14But small is the gate and narrow the road that leads to life, and only a few find it.

101 posted on 08/11/2007 9:20:11 AM PDT by DJ MacWoW (Jesus loves you, Allah wants you dead)
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To: Rightly Biased
Not being sanctimonious just giving my testimony about what I have learned about debt and how it puts a person into slavery.

Yes. You are an inspiration to us all.

102 posted on 08/11/2007 9:20:15 AM PDT by Barnacle (Hunter 2008)
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To: Rightly Biased

Well, we’re a little old to not know our limitations, so I don’t think we’re playing with fire. We’ve been saving religiously for years, always have the money taken out before we even see it in the paycheck, and invest it. Add that to retirement accounts and I don’t think we’re going to get burned, because as I said, we don’t buy anything we don’t have the money in the bank to pay for. We’ve lived in the same house for 20 years and had a 15 year mortgage, so that’s done. We drive 10 year old cars that we bought when they were “almost new”...(we don’t believe in car payments)...but we’ll drive those cars till they wear out, then buy used cars again.

We’re not taking risks...and you shouldn’t make blanket statements that it is never right to use credit...that’s just not the case. It might be right for you and for many others, but it’s not fair to put your experience on others. It’s great to give advice, but you can’t assume that everybody will fall into the same trap you did.


103 posted on 08/11/2007 9:20:52 AM PDT by dawn53
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To: Rightly Biased

It took me about 5 minutes. We just took money from savings and paid it off. It took a lot of splaining though. We were using a savings account for emergencies. That’s what the credit card is for.


104 posted on 08/11/2007 9:22:04 AM PDT by AppyPappy (If you aren't part of the solution, there is good money to be made prolonging the problem.)
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To: dawn53
The talents were given money not loaned money. Read the story in context.

God does not contradict Himself.

Electricity is the same way as your exterminator but I have the money to pay for those services If I have trip in my life.And that is money paid for services rendered.

Why would I want to put myself in the risk of owing to a cc company?

105 posted on 08/11/2007 9:22:36 AM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: Shooter 2.5

Don’t gloat. Convince her you are penniless and in debt up to your eyebrows. That way she won’t suddenly remember money you should have paid her.


106 posted on 08/11/2007 9:23:36 AM PDT by AppyPappy (If you aren't part of the solution, there is good money to be made prolonging the problem.)
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To: AndyJackson

Long term investments are your best bet.

Not microwave cooking but crock pot cooking.


107 posted on 08/11/2007 9:24:22 AM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: Rightly Biased

As I’ve been saying all along...I have the money too to pay off the CC, and I do it at the end of each month so I don’t pay interest.


108 posted on 08/11/2007 9:24:27 AM PDT by dawn53
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To: FreePaul

You missed the point of the article with your simplistic reply.


109 posted on 08/11/2007 9:24:44 AM PDT by em2vn
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To: dawn53

Makes sense to me. I’m using mine to rebuild my rating after taking several major bad hits in life. I buy things that I’d normally buy, then pay it off every month in full. That’s all the plastic gets used for, and that’s why I have it.


110 posted on 08/11/2007 9:26:06 AM PDT by Riley (The Fourth Estate is the Fifth Column.)
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To: dawn53

I am amazed at people who have money in the bank at 4% and debt at 15%. They never think to use the savings to pay the debt.


111 posted on 08/11/2007 9:26:14 AM PDT by AppyPappy (If you aren't part of the solution, there is good money to be made prolonging the problem.)
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To: AppyPappy

I wish I could have done it that way then I wouldn’t have all of these people telling me that credit cards are the only way to survive in the world.


112 posted on 08/11/2007 9:26:26 AM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: Barnacle

Thanks I try!!


113 posted on 08/11/2007 9:27:03 AM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: FreePaul

For some, personal responsibility is a foreign concept.


114 posted on 08/11/2007 9:28:16 AM PDT by Rush4U
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To: dawn53

As I have said you can assume the risk if you want to.

I will not and will advise others not too as I get a chance.


115 posted on 08/11/2007 9:28:42 AM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: Moonman62
That was back when there where debtors prisons and before bankruptcy laws.

You mean the 'new' bankruptcy laws that were written by the credit card companies themselves and made into law by the Republican controlled congress? They knew this was coming and are making a fortune, not off legitimate fees but off their new forms of usery which are now perfectly legal.
116 posted on 08/11/2007 9:29:44 AM PDT by Liberty Valance (Keep a simple manner for a happy life :o)
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To: Ronaldus Magnus Reagan

A couple of these are on my agenda. Especially the reverse mortgage.

I am not happy with the present situation, but don’t plan to stay with it forever.


117 posted on 08/11/2007 9:31:28 AM PDT by jwparkerjr
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To: dawn53
Ok your risk not mine but I understand what Solomon meant by that scripture.

And again I will get accused of being sanctimonious

118 posted on 08/11/2007 9:32:59 AM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: Rightly Biased
Long term investments are your best bet. Not microwave cooking but crock pot cooking.

Had you followed your sage advice in 1928 you would have broken even again in 1954.

Risk is risk and has not been priced into our markets for a long long time.

119 posted on 08/11/2007 9:34:54 AM PDT by AndyJackson
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To: Rightly Biased

I am personal friends with my bank manager. She told me that debit cards are much riskier than credit cards because someone using the card can clean out your account in minutes and you have no protection. Where with a credit card the most you can get stuck with is $50.

Either way, I use cash for darn near everything.


120 posted on 08/11/2007 9:37:28 AM PDT by B4Ranch ( "Freedom is not free, but don't worry the U.S. Marine Corps will pay most of your share.")
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To: dawn53; AndyJackson

You and AndyJackson have a true grasp of the topic. Too many here are sounding like alcoholics, condemning the demon booze when the true weakness is within their own character.

It all comes down to personal responsibility. Successful management of your personal finances, like every aspect of your life, can be conducted planned & responsibly, or haphazard and recklessly.

I like it when my money works for me, not the other way around!


121 posted on 08/11/2007 9:38:30 AM PDT by rockrr (Global warming is to science what Islam is to religion)
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To: em2vn
The point of the article is pretty clear. If you run up debts you can't pay off you are in a trap the credit card companies set for you. The solution is to stop before you run up debts you can't pay off. Anyone who isn't aware of the problems involved when dealing with credit card companies is doomed to be in their debt forever.

Maybe we could get a law passed which would dismiss all debts when they reach a certain limit. That would be the compasionate thing to do and it would satisfy some, I'm sure.

122 posted on 08/11/2007 9:39:54 AM PDT by FreePaul
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To: Non-Sequitur

> If I wanted to max them all out I could ring up well in excess of $120,000. That’s insane.<

I imagine your assets are well above that puny figure.


123 posted on 08/11/2007 9:41:39 AM PDT by B4Ranch ( "Freedom is not free, but don't worry the U.S. Marine Corps will pay most of your share.")
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To: AppyPappy

I never carry a balance, so I don’t pay interest, but I’ve always assumed if you had money in the bank earning less than your rate of borrowing, you’d use it to pay off debt.

We felt that way about our mortgage, we used extra cash to pay it off (this was back in the day when interest rates were 8 percent.) Folks said, well if you pay it off you can’t take your interest then as a deduction on your taxes...so what...for every dollar I pay in interest to take as a deduction on my taxes, I only save a little more than a quarter in taxes.


124 posted on 08/11/2007 9:42:21 AM PDT by dawn53
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To: B4Ranch

If you prove you did not make the purchases you are covered the same. Of course a banker would tell you to use a credit card especially one from thier bank.

I know I’m not gonna win this argument with anyone that thinks credit cards are the only way to survive but I know better. sigh........


125 posted on 08/11/2007 9:42:43 AM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: Liberty Valance
You mean the 'new' bankruptcy laws that were written by the credit card companies themselves and made into law by the Republican controlled congress? They knew this was coming and are making a fortune, not off legitimate fees but off their new forms of usery which are now perfectly legal.

I think you're right. I actually favor the Democrats on this issue.

126 posted on 08/11/2007 9:43:24 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: AppyPappy
She doesn’t Freep, she lives in another state and my kid is on my side living in the next town. I also don’t discuss finances with him. He’s always trying to get me to invest and I keep putting it off. I’m having too much fun buying toys that keep their investment.

One time he did get a little edgy and told me he’s probably going to have to care for her as she gets older. He wants me to move out of state with him so we can find some adjoining property. Maybe enough room for a runway because I always wanted an ultralight aircraft although renting one a couple of times a year would be as much fun.

127 posted on 08/11/2007 9:44:34 AM PDT by Shooter 2.5 (NRA - Hunter '08)
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To: Go Gordon
Lending is different than borrowing

Duh.

How can you have borrowing without lenders, though?

128 posted on 08/11/2007 9:44:55 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: AndyJackson

Look at mutual funds with a ten year track record and invest in those. yes there is risk but not as much as depending on credit cards for every thing especially income.


129 posted on 08/11/2007 9:45:08 AM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: Hydroshock

Skip the double payment on the car loan and put the second payment in the bank. Car loans are usually structured in a way that assures there’s almost no interest savings in paying them off early. So, if you’re going to pay the interest anyway, you might as well have some pad and some interest income while you’re at it.


130 posted on 08/11/2007 9:50:31 AM PDT by ArmstedFragg
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To: Hydroshock

Credit card companies routinely offer credit to college kids, counting on them getting in trouble and getting a bail out from their parents. That’s been going on for years.

Now, Bank of America is offering visa cards to illegal aliens, and mortgages, too, all without any credit or background check. There’s no one to bail out the illegals. With the problems that we are seeing with the high risk mortgages, what do you think will happen with high risk credit being extended to illegals?


131 posted on 08/11/2007 9:54:47 AM PDT by Eva
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To: Moonman62; Go Gordon
The difference is this, one of the Jewish families I knew owned a pawn shop. Backing in the 1990’s I was in construction and was always on the look out for good cheap tools. Alot of construction workers would hock their tools. Example, I bought an 1 1/4” williams combo wrench for 50 cents on the dollar in great shape. Although they loaned out money on a daily basis they NEVER borrowed.

I would go there about twice a month and noticed his daughter who worked there getting out of a new Ford mustang. It was her high school graduation present, I commented on it and he told me he loved the look on the salesman's face when he decided on the car and went to his SUV and got a briefcase of $100 bills to pay for it.

132 posted on 08/11/2007 9:56:33 AM PDT by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: Rightly Biased
You actually can save money by using credit cards if you use borrowed money in a business, like a line of credit. You get 30 days on the original charge from the company, you pay the bill with your credit card and get an additional 30 days and then you use the line of credit to pay off the credit card so you get an additional 30 days interest free.

My son ran into a situation that we'd all like to avoid, he used all his savings, sold everything he could and then charged all his credit cards to the hilt. He ended up with a large debt but since he had such good credit he was able to find a deal where he could transfer almost all the debt to a new card with 2.9% for the life of the debt.

It has all kinds of conditions, like if you charge anything else to the card the interest rate will change or if you are late,it changes, he just destroyed the credit card and pays the bill early.

I also know a lot of people who have used them wrong but that doesn't make the credit card bad.

Money itself is just a tool and so are credit cards if you use them correctly, they can be a very valuable tool.

133 posted on 08/11/2007 10:01:58 AM PDT by tiki
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To: rockrr
Too many here are sounding like alcoholics, condemning the demon booze when the true weakness is within their own character.

Not quite. I am condemning the tyrant who runs the local zoning board who shut down the movie theater and grocery store and replaced it with a liquor store that sells peanuts and potato chips, and then is surprised that the local population is fat and drunk. That the population eats peanuts and drinks beer cannot be condemned as an irrational choice on their part. It is an irrational choice on the part of the zoning czar, unless, perhaps he is corrupt and owns a share in or takes payoffs from the liquor store.

134 posted on 08/11/2007 10:05:57 AM PDT by AndyJackson
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To: Moonman62
Lending is different than borrowing Duh. How can you have borrowing without lenders, though?

You commented about Jews lending money. The thread was about incurring debt. I was always told that Jews were taught not to BORROW. I hope you now see my point.

135 posted on 08/11/2007 10:08:25 AM PDT by Go Gordon (The short fortune teller who escaped from prison was a small medium at large.)
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To: Hydroshock
But don't you hate them for lending money? Doesn't that make them Wall Street types, or at least the enablers of people in debt?

(Disclaimer: I have nothing against Jews or their financial success)

136 posted on 08/11/2007 10:18:14 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Hydroshock
It was her high school graduation present, I commented on it and he told me he loved the look on the salesman's face when he decided on the car and went to his SUV and got a briefcase of $100 bills to pay for it.

These days, car dealers make so much money selling loans they would probably cancel the deal if you whipped out the cash on them.

137 posted on 08/11/2007 10:22:06 AM PDT by AppyPappy (If you aren't part of the solution, there is good money to be made prolonging the problem.)
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To: Moonman62

No, why would I? Extolling the virtues of trying to live debt free and below your means does not mean I hate anyone. It does mean I love keeping my money where I think it belongs, my accounts.


138 posted on 08/11/2007 10:24:23 AM PDT by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: AppyPappy

Under TX law I do not think they can.


139 posted on 08/11/2007 10:26:12 AM PDT by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: dalereed
You’re irresponsible and shouldn’t have a CC.

A CC isn’t for the purpose of borrowing, it’s a convienence card.


That's pretty funny.

So, in your opinion, everyone trapped in credit card debt is trapped because they just wanted something extravagant that they couldn't afford and just whipped out the credit card?

What about people who are in some kind of emergency, lose their jobs through no fault of their own, have to take another one quickly for a massive pay cut, and still have to pay for essentials? Should those people just not have made the purchases?
140 posted on 08/11/2007 10:28:55 AM PDT by mysterio
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To: mysterio

“What about people who are in some kind of emergency,”

They should have savings to pay for those emergancies.

I have no sympathy for anyone that puts themselves in debt.


141 posted on 08/11/2007 11:25:50 AM PDT by dalereed
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To: mysterio

Those same “emergency borrowers” always seem to have a cell phone and a big TV.


142 posted on 08/11/2007 11:27:15 AM PDT by AppyPappy (If you aren't part of the solution, there is good money to be made prolonging the problem.)
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To: AppyPappy

I was talking to my wife last night about wanting a big scree plasma tv. We are talking about in November or December looking in the local pawn shops and paper. I figure there will be deals on almost new ones to be had after the arms reset for someone with cash.


143 posted on 08/11/2007 11:36:58 AM PDT by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: Rightly Biased

>If you prove you did not make the purchases you are covered the same.<

A debit card takes your money from your checking account. There is no credit involved. It is not protected. It is the same as someone using your checkbook. When the cops catch them then you can sue the thief to get it back.

You don’t have to sigh to me about credit cards. I don’t like them either. They are a good way to maintain solid receipts on items that do have a manufacturers warranty though.


144 posted on 08/11/2007 11:40:16 AM PDT by B4Ranch ( "Freedom is not free, but don't worry the U.S. Marine Corps will pay most of your share.")
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To: dawn53

“I’m beating the system. I buy everything with a credit card that offers reward points. I never carry a balance, so I never pay interest. I get lots of “free stuff” with my reward points that I would otherwise have to pay for.”

You are not beating the system. You are using the system. The retailers that sell you stuff are paying 2-5% to the credit card company. That’s how I work as well. As long as you pay off the card every month, you will never have an interest or penalty charge.

I get a new tire, mounted and installed, every year (from my local Harley Davidson dealer) with the 1% points back. I’m thinking of changing to one of the plain old “cash back” cards, however.

Credit cards are a good thing if you are looking for convenience. They make Internet purchases without risk possible. I’m still wary of the debit card.


145 posted on 08/11/2007 11:59:21 AM PDT by Poser (Willing to fight for oil)
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To: B4Ranch

No my bank actually a credit union insures my purchases and protects illegitimate purchases with my debit card just like a credit card. And I know there is no credit involved that is why I use a debit card.


146 posted on 08/11/2007 12:05:48 PM PDT by Rightly Biased (Courage is not the lack of fear it is acting in spite of it<><)
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To: fleagle
There are many valid reasons (medical expenses, auto repair, unforseen emergencies) that people have to put on credit cards. Save your sanctimonious crap dude. Credit card companies suck. The average credit card holder does not.

OK, so let's say that many of the folks here get their wish and all the credit card companies are shut down. Now where do you get your emergency money? Why don't you get it there now?

147 posted on 08/11/2007 12:13:11 PM PDT by weaponeer
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To: Moonman62
Donald Trump declared bankruptcy and he’s doing alright.

Donald Trump has never declared bankruptcy. One small corporate entity of his many dozens of corporate entities declared bankruptcy. There's a reason they do it like that.

148 posted on 08/11/2007 12:19:25 PM PDT by weaponeer
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To: dalereed
They should have savings to pay for those emergancies.

You really don't get it do you? Do you understand the number that the FED's policy of inflation has done on personal savings?? If you don't then you are one of the clueless idiots who keeps these clowns in NY and DC going.

149 posted on 08/11/2007 12:39:20 PM PDT by AndyJackson
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To: B4Ranch
I use Wachovia and they call their debit card a Visa check card. I don't know if there is any difference between that and a regular debit card. Here's what they say about protection from fraud (notice the words "confirmed fraud"...I'm not sure what that means.)

Convenient, easy, and safe.

Use your Visa Check Card at millions of merchant locations that accept Visa debit cards, thousands of network ATMs, to make purchases over the phone or on the Internet, or for automatic bill payments.

Purchase amounts are automatically deducted from your checking account, and all transactions are detailed on your monthly account statement with the merchant name, date, and amount

With Wachovia Check Card protection, if you become a victim of confirmed fraud, 100% of any missing money will be credited to your account the next day.

Using your Check Card instead of writing a check means personal information like your address, phone number, and driver's license number stay confidential.

150 posted on 08/11/2007 12:45:56 PM PDT by dawn53
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