LowCards.com Weekly Credit Card Update – February 1, 2013
Strapped for new revenue and pressed into waves of cost cuts, the country’s largest banks are trying to keep the customers they have, woo the ones they don’t and do it all for less. Banks may have a cheap solution. Smartphones let customers deposit checks, pay bills and check their balances without ever stepping into a bank branch. The biggest banks have all spent years developing mobile banking applications, in the hopes that their investment in that technology will eventually pay off. Story by Maria Aspan for American Banker.
Persian Gulf consumers are shifting to debit and prepaid cards from credit cards as regulators tighten rules on bank lending. Transactions by debit cards are increasing twice as fast as credit cards, while prepaid card transactions are growing 8 times faster than debit. Story by Robert Tuttle for Bloomberg.
If you have ever disputed a charge with your debit or credit card company, the card issuer generally takes your word against the merchant or service provider at the outset, restores the money to your bank account temporarily or issues a credit and then goes about its investigation. Every time someone initiates a dispute, the bank that issued the card must look into it and this takes a lot of manual labor. Merchants must carve out time to respond to each dispute. They also pay one-time fees for the privilege and may end up paying higher overall fees to accept cards if disputes are too frequent. They could also get cut off from accepting cards altogether. The true cost per dispute to the banks ranges from $10 to $40. Story by Ron Lieber for The New York Times.
Merchants who accept credit cards issued by Visa and MasterCard are now allowed to add a service charge to the purchase price, which could cost you more to shop with a credit card at some stores. The surcharge is supposed to equal the actual cost of processing the credit card transaction, which is typically 1.5 to 3 percent. Under the agreement, the fee is capped at 4 percent. The surcharge can vary based on the type of card. Wal-Mart, Target, Sears and Home Depot said they have no plans to add a credit-card surcharge. Credit card surcharges are banned by law in 10 states. Visa and MasterCard have rules that require retailers to handle credit cards the same way in all of their stores across the country. Story by Herb Weisbaum for NBC News.
Banks have long complained about the sweeping powers of the Consumer Financial Protection Bureau, but now they are concerned that the agency could be weakened and recent rules declared invalid. This is because a federal appeals court ruled that President Obama’s appointments to a national labor panel were unconstitutional because of the way he used the longstanding practice of making recess appointments, which could also affect the appointment of Richard Cordray, director of the CFPB. If a court rules similarly against Cordray, that could invalidate or call into question the agency’s rules on mortgages and other consumer matters, causing new headaches for lenders and consumers. Story by Alan Zibel and Michael Crittendon for the Wall Street Journal.
The Equifax credit reporting agency has assembled what may be the most powerful and thorough private database of Americans’ personal information ever created through its company called The Work Number. The database contains 190 million employment and salary records covering more than one-third of U.S. adults. Some of the information is sold to debt collectors, financial service companies and other entities. “It’s the biggest privacy breach in our time, and it’s legal and no one knows it’s going on,” said Robert Mather, who runs a small employment background company. “It’s like a secret CIA.” Story by Bob Sullivan for NBC News.
This year, the IRS is tackling a problem that is growing rapidly: tax-related identity theft. This occurs when thieves steal your social security number, file a false tax return and collect your refund. This usually happens early in the filing season, before the legitimate taxpayer files. Tax-related identity theft is growing. According to the latest GAO Report, the IRS identified 47,730 incidents in 2008. That number grew five-fold in three years to 242,142 incidents in 2011. Through just nine months of 2012, there were already 641,690 reports. Thieves greatly outnumber IRS agents and are known to direct multiple fraudulent returns to one address, then change the address when agents catch on. Story by Bill Hardekopf for LowCards.com.
The number of student loans held by subprime borrowers is growing, and more of those loans are delinquent. This is one more sign that a weak job market and rising debt loads are squeezing recent graduates. In the five years through last March, the portion of all student loans that were 90 days or more delinquent rose to 11.4 percent from 8.8 percent. In all, 33 percent of all subprime student loans in repayment were 90 days or more past due in March 2012, up from 24 percent in 2007, according to TransUnion. Story by Ruth Simon and Rachel Louise Ensign for the Wall Street Journal.
Based on the 1000+ cards in the LowCards.com Complete Credit Card Index, the average advertised APR for credit cards is 14.33 percent, slightly above last week’s average of 14.32 percent. Six months ago, the average was 14.34 percent. One year ago, the average was 14.25 percent.