Credit Card Update March 18
BILLS WOULD DELAY SWIPE FEE RULES
Lawmakers from both parties embarked Tuesday on an uphill battle to delay a controversial law that would reduce the fees banks receive from merchants each time a debit card is swiped, following weeks of fervent lobbying by the financial industry. Bills introduced in the House and Senate would require a government study of the interchange, or “swipe,” fees. The Federal Reservecould then be forced to rewrite regulations that slash the fees by 70 percent. Those rules, which are expected to cost banks billions of dollars annually, are slated to take effect July 21. The Senate measure, introducedby Sen. Jon Tester (D-Mont.) and backed by eight lawmakers from both parties, would put off implementation of the law for two years. The House version, from Rep. Shelley Moore Capito (R-W.Va.), calls for a one-year delay.
Story by Ylan Q. Mui for the Washington Post
NEW CREDIT CARD FEE IS WINDFALL FOR
BANK OF AMERICA, UNFAIR TO CUSTOMERS
Bank of America’s $59 annual charge for about 5% of its cardholders that begins April 11 appears to violate the spirit of financial reforms. The bank says the fee is to address such issues as payments being too low or balances too high. It also says in letters to some cardholders that the annual fee is a response to “a review of your banking relationships with us.” Betty Riess, a Bank of America spokeswoman, said the annual fee is generally beingimposed on “customers who would not qualify for a new account today.” She added, “They have a choice. They can reject the fee and pay off their account.” The bank has about 40 million credit card customers. That means as many as 2 million cardholders will be slapped with the $59 fee, which translates to a windfall of $118 million in annual revenue for Bank of America.
Story by David Lazarus for the Los Angeles Times
DON’T PAY TAXES WITH A CREDIT CARD
Tax Day is one month away and hearts start pounding a little faster as thoughts turn to submitting our returns. This is also the time that credit card issuers encourage customers to use their cards as a convenient way to pay their tax bill. It may be convenient, but it’s certainly not free. Even the IRS promotes the benefits of paying taxes with a credit card. The IRS website says that payment with a credit card is “convenient, safe and secure,” and reminds taxpayers that if they are enrolled in a rewards program, they can earn miles, points, and cash back. Credit card payments to the IRS are processed by third-party providers. These companies charge a processing fee, which averages 2.35% but can be as high as 3.93%.
CREDIT CARD DEBT THAT OUTLIVES MOM
Experts say that unlike a mortgage or a car loan, credit card debt is unsecured, meaning that it isn’t tethered to an asset. When someone dies,credit card companies have to wait near the back of the line to receive payment. If what’s left over after settling the estate isn’t enough to pay the bill, credit card debt is written off. Spouses, children or other loved ones don’t “inherit” credit card debt unless they co-signed the card. (If one owner of a joint credit card dies, the others automatically become responsible for the balance due.) How to dodge that bullet? Never use joint credit cards, said Stephen Silverberg, former president of the National Academy of Elder Law Attorneys. If a card must be shared among family members, he said, one person should apply and sign for it, then add users afterward. Alternatively, be pre-emptive. After the death of a parent, send a letter or call the banks and credit card companies to cancel cards and let them know that the cardholder has died. Tell them that you are in the process of settling the estate and will keep them posted on your progress.
“A great deal of credit card companies will actually stop charging interest at that point,” Mr. Silverberg said. What gets settled before credit cards? Generally, administrative fees (like executors’ fees, filing fees, appraisals of property and tax-preparer fees), mortgages, reverse mortgages, taxes and even funeral expenses have to be paid off before heirs can inherit anything from the estate. As with credit card debt, heirs are not directly responsible for debt like mortgages or reverse mortgages unless they were co-signers.
By Sherisse Pham for the New York Times
CREDIT DELINQUENCIES IMPROVE FOR CARD ISSUERS IN FEBRUARY
Credit card borrowers were more timely in their payments in February, and their lenders charged off fewer of their loans, monthly reports from large card lenders disclosed Tuesday. There were indications, though, that lenders continued to have trouble expanding their books of credit card loans. The more that cardholders charge on their plastic, the more the companies earn in fees, so the amount that customers spend is critical to them. Card-loan balances–and, as a result, revenue–have been falling as companies, stung by steep losses during the economic slump, scaled back on credit and toughened lending standards. Revolving credit lines–mainly card balances–shrank by $4.2 billion in January from December, according to the Federal Reserve. That is an annualized rate of decline of 6.4%. Since the end of 2008, these balances have shrunk by $162 billion to $795.5 billion. Credit card issuing banks are also facing an erosion in profits and revenue stemming from new rules curbing income on credit and debit cards.
Story by Aparajita Saha-Bubna for the Wall Street Journal