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Archive for Sunday, December 4, 2005

Temp’ charges affect credit

Stores’ tests count against card limit

December 4, 2005

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Checking one of my credit-card accounts online the other day, I noticed a few charges labeled "Temp." Some were charges I hadn't even made yet, like a whopping $850 for heating oil that wouldn't be delivered for another couple of days.

What gives?

A "temporary authorization" is recorded when a merchant tests to see if the customer has enough credit to cover an expected charge. They are common, for example, when you rent a car or reserve a hotel room.

Although the temp charge won't appear on your actual bill, it does count against your credit limit. So if you're running close to your maximum, temp charges can cause subsequent charges to be denied.

Worst of all, temp charges can sit in your account even if the transaction never takes place or is canceled. On my card, they can stay there for as long as 30 days. And my card issuer doesn't allow the customer to dispute temp charges.

All of this stinks, but there's nothing to be done about it other than to keep a good running tally of your credit-card use. If you think you're running close to the limit, check the account online or by phoning the issuer.

Before taking a trip, make sure you've got plenty of credit available. And take along all the contact information for your card issuers. In a pinch, you might well be able to get the credit limit raised with no more than a phone call.

Thanks, bond traders

If you're casting around for things to be thankful for, consider those easily overlooked bond traders, who have momentarily given us the best of both worlds: higher yields on savings and low rates on loans.

When short- and long-term rates are nearly the same, it's called a flattened yield curve, and in recent weeks it's gotten flatter and flatter.

Normally, interest rates on short-term savings such as bank accounts and money market funds are substantially lower than those on long-term savings like 10-year U.S. Treasury bonds. That's because investors usually demand higher yields for tying their money up for many years.

A year ago, a chart of yields on Treasury securities showed a fairly normal yield curve. Three-month Treasury bills paid around 2 percent and 10-year Treasury bonds paid a bit more than 4.5 percent.

Now the difference is much smaller, with the three-month bill paying about 4 percent and the 10-year bond about 4.3 percent.

Easing inflation fears

The reason is that the Federal Reserve, worried about inflation, has been driving up short-term rates. But long-term rates are set as bonds are traded in the secondary market, and bond traders apparently don't think there's much risk of high inflation in the coming years, so they've kept those rates low.

All of this is good news if you're in the market for a mortgage, since rates on those loans tend to move in tandem with 10-year Treasury yields. You can get a 30-year, fixed-rate mortgage for about 5.8 percent, up only slightly from the 5.4 percent 12 months ago. If bond traders shared the Fed's worries about inflation, mortgages might be charging 7 percent or 8 percent.

Now it looks like mortgage rates could linger at current levels for months. With oil and gasoline prices pulling back, the inflation threat may be easing.

If you've got some cash to stash, there's no need to hunt for a long-term bond or bond fund. One-year CDs average around 4 percent, and some money markets have hit 3.25 percent.

Jeff Brown is a business columnist for The Philadelphia Inquirer.

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