Credit Card Update April 8
DELINQUENCY RATE ON BANK-ISSUED CREDIT CARDS FALLS
U.S. bank credit card delinquencies dropped to their lowest levels in nearly a decade, according to a report released on Tuesday by the American Bankers Association. Consumers did a better job overall in meeting their debt obligations in the fourth quarter of 2010 as the economy continues to slowly improve. The delinquency rate on credit cards issued by banks fell to 3.28 percent in the fourth quarter from 3.64 percent in the previous three months. This was the lowest rate since the first quarter of 2001 and below the 15-year average of 3.92 percent, according to the ABA.
Story by Dave Clark for Reuters
CITI TO START CLEARING SMALLER CHECKS FIRST
Citibank will soon start clearing customer checks in a way that minimizes the potential for multiple overdraft charges. It will process checks starting with the smallest amounts first as of July 25. Most banks process larger checks first, a practice consumer advocates say increases the potential for multiple overdraft violations on checking accounts. The new
check clearing method will only affect consumer checks. Citi does not process overdraft debit transactions or ATM withdrawals. Banks say the high-to-low check processing helps consumers because larger checks tend to be for mortgages and other high priority payments. But consumer advocates say the practice is a way for banks to rake in more overdraft charges, which are often as much as $39 per violation. The fee is $34 per violation at
Story by Candice Choi for the Associated Press
STUDY SHOWS THE HAZARDS OF CREDIT CARD INDEBTEDNESS
There is still a large group of Americans who are indebted to their credit card. A new study released by Demos, “Understanding the Debt Difference,” examines credit card usage among low- and middle-income families and shows the effects of credit card indebtedness. It compares the difference between households who had credit card debt (defined as households with revolving balances on their credit card for three months or more) to a non-indebted group that did not carry a balance on their credit cards. According to the study, indebted families use credit cards to pay for basic expenses and make up for their lack of assets. However, this reliance on a credit card increases a family’s economic vulnerability and increases the reliance on credit cards in the future. The families with credit card debt are more likely to have experienced unemployment, an unexpected medical expense, or a loss of health insurance.
FEDERAL RESERVE MUST FACE BANK SUIT OVER CREDIT CARD FEE RULES
Federal Reserve Chairman Ben Bernanke lost a bid to end a bank lawsuit challenging the legality of forthcoming rules limiting the amount of money the largest U.S. banks can collect for debit card transactions. TCF bank sued Bernanke and the Fed’s Board of Governors in October challenging the legislation appended to last year’s Dodd-Frank financial regulation overhaul bill. The Sioux Falls-based unit of TCF Financial reportedly makes about $8 million a month on the fees. It sued the Federal Reserve Board trying to bar the rules, mandated by Congress, that it says will make it lose money on debit-card services.
Story by Andrew Harris for Bloomberg
STUDY: PARENTS FIND IT EASIER TO TALK TO KIDS ABOUT DRUGS THAN MONEY
Most parents find it easier to discuss drugs and alcohol with their kids than family finances, according to a new study from T. Rowe Price. Talking about investing is just as difficult as addressing puberty and coming of age. Parents want to be the ones to educate their kids about personal finance, but only give themselves a B- when grading their own track record as a financial role model, and don’t great much better when it comes to their own financial know-how. On top of that, more than a third of parents gave themselves a C or lower when it came to their own understanding of finances and investing-on average, parents gave themselves a B. Still, parents would rather handle their own child’s financial education than leave it to a teacher or other other adult. Yet two thirds of parents said they could do more to teach their kids about personal finance. The majority of parents say financial education should start before the age of 10.
Story by Maggie Shader for Consumer Reports
KOHL’S TRANSFERS CREDIT CARDS TO CAPITAL ONE
Kohl’s Department Stores announced Tuesday that it has completed the transfer of its store-brand credit card accounts to Capital One Financial Corp. from JPMorgan Chase & Co. Kohl’s announced the move in August. It has said the changes will be “largely transparent” to customers. Capital One has a seven-year agreement to offer the Kohl’s credit cards. Kohl’s
private-label credit card business, which now has 20 million-plus accounts, accounted for 50 percent of Kohl’s revenue in 2010, the company said.
Story by the Associated Press
FREE SOFTWARE TO PROTECT YOUR BANK ACCOUNT
Hackers and crooks are scheming to crack Internet banking links and steal your money and personal data. So some banks are urging you to add an extra layer of protection, by using software with the somewhat tongue-twisting name Trusteer Rapport. Bank of America began promoting Rapport to its 29 million online banking customers this week. But the bank has been quietly offering the software on its public Web site since February to anyone who wants it–free–whether they’re a bank customer or not. Mickey Boodaei, chief executive of the Web security firm Trusteer, maker of Rapport, said the software focused on guarding your browser, which links you to your bank. The program was designed in response to the emergence of financial “malware” programs, which sneak onto your computer while you’re surfing the Web and then pilfer information sent through your browser. “Fraudsters are becoming more sophisticated,” he said.