Credit Card Update February 25
4Q CREDIT CARD DATA SHOWS CREDIT CARD USE RETURNING TO NORMAL
Consumers used more plastic during the holiday season without ballooning their balances, and the delinquency rate for credit card accounts fell to its lowest point in 15 years. That’s a positive combination reflected in the latest quarterly analysis from the credit reporting agency TransUnion. The
company also noted that the number of new credit cards issued during the last three months of 2010 increased by 19 percent over the same period in 2009. It was just the second straight quarter when more cards were issued.
That hasn’t happened since late 2007. The average combined balance consumers had on their bank-issued credit cards–including MasterCard, Visa, American Express and Discover cards–fell to $4,965. That’s down 8.6 percent from the fourth quarter of 2009.
Story by Eileen AJ Connelly for the Associated Press
BANKS SWIPE SNIPE
Chafing under new financial regulations, some of the nation’s biggest banks, including JPMorgan Chase, Citigroup and Bank of America, are mulling limits on the size of debit-card purchases. Such a move would cap the amount of money–banks are weighing between $50 and $100–consumers could shell out on individual transactions using their debit card. The limits being contemplated would be imposed on debit-card holders regardless of how much money they held in their checking accounts and are likely to push customers to use credit cards to cover the difference. In December, the Fed surprised the banking industry and set off a lobbying firestorm by proposing to slash swipe fees by 80 percent, from 63 cents to a maximum of 12 cents. On average, banks collect about $15 billion a year from swipe fees, or an average of $200 a year per family.
Story by Mark Decambre for the New York Post
CHECKING ISN’T FREE AT MORE BANKS
The nation’s largest banks are testing how much their customers are willing to pay for checking-account services that used to be free. Bank of America and J.P. Morgan Chase, the two biggest banks as measured by assets, have begun trying new fees in pilot tests from Hayward, Wis., to Newnan, Ga. They include an account that charges a $3 monthly fee for debit cards. Another account designed for electronic-only banking charges customers a $12 monthly fee if customers go to a teller for assistance. In the test programs, some bare-bones checking accounts also now carry base fees ranging from $6 to $9 a month. The new fees, which are limited to accounts for new and prospective customers in the pilot programs, can typically be waived if customers meet certain criteria. Banks are testing the new programs even as they hold out hope for delays or changes to the new law, which is expected to take effect in July. They strongly oppose the measure, which was part of the Dodd-Frank financial-overhaul law enacted last year, saying it will hurt consumers because the banks will be forced to make up lost revenue by raising fees charged to their customers.
Story by Robin Sidel for the Wall Street Journal
ATTRACTIVE AWARDS STILL AVAILABLE ON SOME DEBIT CARDS
Some issuers are threatening to cut their debit card reward programs due to the looming decrease in the interchange fee. This comes at a time when debit card usage has experienced notable increases. As a result, many consumers are searching for debit cards that offer significant rewards. Two of the best deals may be debit-like cards offered by Target and Shell. Both offer consumers substantial purchase discounts on their products. The Target Debit Card gives cardholders a five percent discount on in-store purchases such as groceries, clothing, toys, and electronics. The discount does not apply to prescriptions, Target Mobile purchases, gift cards and prepaid cards. The Shell Saver Card offers a discount of 10 cents per gallon on every Shell gas purchase through April 30, 2011. After that date, the discount will be two cents per gallon on Shell-branded fuel purchases.
JP MORGAN CEO JAMIE DIMON SEES GOOD TIMES IN 2011
When asked the changes consumers will feel from the impact of regulations, Dimon replied: The consumer will end up paying more. I don’t think the consumer’s going to benefit at all from this change. You’re going to see minimum balances go up. Remember many years ago, you had monthly fees. You might see monthly fees come back. You’re going to see reward programs be cut, like debit reward programs. You may even see some limit the use of debit cards. And we want to do it in a way that’s consumer-friendly. But it will be done for general banking. We have decided to look at all options. We want to make sure we treat our customers well, but somehow we’re going to have to find other ways to recover our costs.
Story by Maria Bartiromo for USA Today
WANT THE BEST CREDIT CARD TERMS? BE RICH
It pays to be rich if you need a credit card. A year after sweeping credit card regulations upended the industry, banks are showering perks and rewards on big spenders with sterling credit scores. And they’re socking customers with spottier histories with higher interest rates, lower credit limits and new annual fees. In some cases the riskiest customers are being dropped altogether. The widening differences between how customers are treated is largely the result of new constraints on card issuers. The Credit Card Accountability, Responsibility and Disclosure Act, or the CARD Act, was signed into law with great fanfare at a time when borrowers across the country were struggling to make payments. It swept away several practices that for years had grated on cardholders. The regulations are already transforming the cards on the market. To make up for the drop in revenue, banks are imposing new annual fees and hiking interest rates–but mostly for those with the lowest credit scores. The best customers are more prized than ever.
Story by Candice Choi for the Associated Press
CREDIT CARDS STILL IN WATCHDOG WARREN’S SIGHTS
U.S. consumer regulator Elizabeth Warren warned the credit card industry of further reforms, even while praising it for going beyond the requirements of last year’s crackdown on fees and interest rate increases. Warren peppered her praise with caveats, saying “significant confusion remains” with the terms of credit cards and regulators are ready to thwart any attempts to exploit loopholes. The call for more reform is unwelcome to an industry still reeling from the CARD Act and prepping for a fresh Federal Reserve proposal to cap debit processing fees, mandated by last year’s Dodd-Frank financial reform law.