banktime.com

MasterCard is anticipated to be soon announcing a card in conjunction with Citigroup that will feature a never-before-experienced spate of features designed to protect consumers from their own irresponsible spending. Most credit cards nowadays boast an extensive list of safeguards meant to shield consumers from identity theft and other fraud. MasterCard will take that a step further by shielding cardholders from their own stupid financial decisions. The dedicated MasterCard products will come packaged with a service called inControl that is described as a “financial chastity belt” similar to that already offered to a select class of Barclaycard credit holders in England. The inControl service puts cardholders in the driver’s seat, allowing them to choose from an extensive menu of options to curtail spending based on their own known weaknesses. The product would work in conjunction with credit or debit cards.

An Associated Press report gave these examples. A family that is trying to cut back on their expensive habit of dining out can request that their bank decline any attempted restaurant purchases after a fixed monthly spending limit has been achieved. Are you hellbent on keeping your total monthly spending within a certain limit? You can ask that your card be automatically declined every time you attempt to use it after hitting a certain monthly limit. You can even increase the fraud protections on your card by blocking all incoming charges from nations prone to pirating and scams, like Nigeria or Pakistan. Of course, you can make exceptions to these “rules” or amend them at any time with a quick phone call. It’s a very mild set of restrictions for those who need a little more than self-control to rein in their bad monetary habits. The old method of budgeting – using a spreadsheet and faithfully logging purchases to see where your problem areas are, then utilizing rigorous self-control to stick to the plan. Of course, anyone who’s tried this knows that it’s much easier said than done to commit to a life of financial solvency without help. How amazing is it that a major credit card company like MasterCard is going to enable credit cardholders to use their plastic as a tool for budgeting rather than a one-way pass to being broke?

Visa, MasterCard’s biggest competition, does not currently offer anything as tailored as inControl, although they do allow cardholders to request that their card be “shut off” beyond a fixed monthly spending allowance. That’s at least better than Discover and American Express, which feature nada in the ways of helping consumers make better financial choices. Citi customers won’t all be allowed access to inControl at once; it’s expected that the bank will roll the service out gradually and in phases to have the utmost control and monitoring over it successes and areas for improvement. Credit cards only will be included in the pilot phase of the rollout. MasterCard has announced that other issuing banks have received permission to offer inControl, although they declined to name which banks those were.

The AP report stated that inControl’s core purpose is twofold: warning customers about certain kinds of charges made to their accounts, and prohibiting transaction types classified as “wrong.” The system will send you an alert via text message any time that your card is used for a transaction of more than a certain dollar amount or in certain areas of the country or world. A customer who makes no internet transactions or recurring payments, for instance, might create a tailored alert that pings them any time the card is used other than in-person at a merchant, functioning as an almost real-time fraud alert service. You could then contact your card issuer tout de suite to get the charge reversed and the account flagged for fraud. You can discontinue the alerts at any time by getting in touch with your bank by phone or logging into your bank’s customer service site on the World Wide Web.

It’s expected that inControl will ultimately offer customers the ability to place spending limits on certain companies, although it does not at present. Does your college student blow too much money on Apple’s iTunes site enhancing their mp3 library? Does your wife have a weakness for sales at Ann Taylor? Or do you simply find yourself way too prone to grabbing lunch with coworkers at the local diner versus packing a brown paper bag like a good spendthrift? If there’s enough demand, says MasterCard, the ability to impose monthly spending limits on one or more of these merchants could become a reality. Right now, the best customers can do is block certain merchant groups. You can set a monthly dining cap, for instance, but you can’t specifically block Applebee’s, in other words.

I mentioned college students, and it’s believed that one of inControl’s greatest assets will be helping parents grant children the flexibility of a credit card with the benefits of both a monthly allowance and the responsibilities of sticking to that budget. Nervous empty-nesters sending Junior and Sally away to college can have a card linked to the parents’ account with, say, a monthly budget of three hundred dollars. Purchases at bars, liquor stores, or any other types of problem areas would be prohibited and declined. The parents get the benefit of monitoring spending from afar (and getting credit card rewards points, if applicable!), and the kids have the security and flexibility of plastic, plus a life lesson in the responsible use of grown-up spending tools. It’s a win-win situation. And that’s just one of the possible ways in which inControl can be used by one person to control another person’s spending – or even the spending of many people! Let’s say that you have a nanny who gets a card linked to the parents of her charges’ bank account for gas, emergency diaper or milk pickups, and favorite places to take the kids for entertainment and play dates. The inControl service would let Mom and Dad block out-of-state or Internet charges, as well as anything else that might be tempting to the babysitter. A small business owner could place restrictions on company credit cards so that employees can only use them during weekday hours and at certain categories of merchants – say, only hardware supply stores for the employees of a building contractor.

There’s no doubt that certain services already exist to do what inControl does, however the are not in conjunction with an actual credit card company. Mint.com offers a spate of customization options for alerts connected to your credit card spending, including the ability to narrow purchases by categories like grocery shopping and dining. Here’s the downside, however – Mint.com only syncs with yor bank account and updates your charges once every twenty-four hours, unless the user logs in during the course of the day. That’s far from the real-time protections offered by inControl. Additionally, using Mint.com (or any third-party banking site) requires parting with your bank account log-in info over the Web, which tends to –rightfully!- freak people out.

It’s true that empowering consumers to cap their spending could potentially stab banks in the gut through the consequence of less interest being accumulated as consumers get smarter about spending. But really, credit card companies win out as well by offerings services like inControl to their customers. First of all, they get the good word-of-mouth press that comes with offering a “superior” product to their customer base, as MasterCard’s CEO pointed out recently. Given the terrible reputations that America’s credit card companies have suffered in the wake of the financial crisis, the impression that they are heloing customers control their spending can only constitute a much-needed image boost. Banks might benefit if consumers start using credit cards more frequently to get a better picture of their monthly spending, turning other forms of budgeting over to plastic so they can put more controls on their purchases. Consumers might, for instance, start using their plastic to pay for groceries and gas since they know they can use inControl to limit how much they spend in these areas, then paying their balance off in case at the end of the month. Banks make more money in merchant fees from this increased transaction volume. Plus, customers with more responsible habits are more likely to pay their debts. Freewheeling spending doesn’t benefit card companies if the end result is a pile of defaults. There is definitely something to be said for upping the number of people who will be able to pay back their debt in full!

Of course, inControl is far from foolproof in its current incarnation. It’s a little too easy for customers to turn their spending controls off by either phone, internet, or an anticipated mobile app for Web-enabled cellular phones and devices. Plus, customers will need to exercise prudence with their banks accounts – good spending on your credit card means nothing if all the money to pay your monthly balance goes out the door on crap because you hit up the ATM too often. One might say that having your credit card company send you a nastygram for spending too much on dining options would put a damper on your enthusiasm for blowing illicit cash on lunch at McDonald’s, however.

There are also risks for any bank that would be implementing these controls on a wide basis. It’s a difficult thing to set up a bank’s website to allow customers to personalize their own spending limits and restrictions on merchant types. If any stage of the process were to go wrong, customers would take to the 1-800 phone customer service lines en masse, the staffing for which costs companies lots of dough. Plus, the issue of merchant coding – the lynchpin on which the whole premise of customizing purchases by category depends – is trick at best. The systems by which these codes are determined is recognizably flawed, and popular mass merchandisers like Target and Wal-Mart tend to defy proper categorization, leaving this area of implementation open to trouble.

As a result, it’s believed by some industry experts that Citi and MasterCard could take as long as two years to iron out all the kinks in inControl. The wait is likely to be worth while, they promise. Having these features on a credit card is a premise inherently better than using only cash, because of the inherent ability to track purchases. The real-time protections simply cannot be beat, and you would forfeit the cash back rebates and/or rewards points that you tend to earn as a faithful credit card customer. For all these reasons, it’s optimistically believed that suites of controls like inControl will eventually become the industry standard, as opposed to a cool exception. The long-term availability of these services will also be something of a test of banks’ sincerity in making good with customers after a long and painful recession. Are they willing to put their money where their mouths are when they talk about wanting to help customers make more prudent monetary decisions? Only time will tell.

I for one absolutely love the promise of inControl and the services that would be offered when it is rolled out on a wider basis. I’m pretty good with my budget, but I’d love the extra protection of being able to place an ironclad limit on, say, the impulse purchases I can make on cute children’s clothes at Old Navy or The Children’s Place. The ability to control my family’s dining out budget would also be a powerful and useful tool in my money belt! A lot of people I know would benefit greatly from this service, and I’m willing to bet that scores of families and individuals across the United States feel the same way. Let the customers make good decisions for themselves! It would be so lovely to think that the big credit card companies are actually doing something for us for once. When I read about this promising new service, it was definitely the first sign of anything remotely approaching good customer service and consumer relations that I’ve seen from banks in a while, during these days of account closings, spending limit hacks, and interest rate hikes. It’s time for the banks to give us a show of good faith. I’d be willing to take this one, if it works out.