LowCards.com Weekly Credit Card Update–August 8, 2014
Why You Have To Start Paying Down Your Credit Cards Right Now
Federal Reserve meetings aren’t high on most people’s list of interesting things, but if you have a credit card and carry a balance, you should probably start paying attention to what America’s top money policymakers are talking about, because it’s going to affect your monthly bill. During last week’s Federal Open Markets Committee meeting, analysts were listening closely to tease out a sense of when the central bank will raise interest rates–always an endeavor that’s one part math, one part reading tea leaves. It’ll probably happen sometime next year. This means you have, at maximum, maybe a year and a half before your credit card bills jump. Story by Martha C. White for Time.
An Expensive Hack Attack: Target’s $148 Million Breach
The massive breach of Target’s computer systems in late 2013 was a costly one: Financial institutions alone spent more than $200 million in response to the hack, replacing millions of credit cards whose data had been compromised, while the company’s Chief Information Officer and CEO both left their posts in its wake. And today, another sign of the hack’s full cost: Target says its coming second-quarter results will include $148 million in expenses related to the breach. It will get back $38 million of that via an insurance payout, but it’s still enough to be a drag on results. It means to total costs of the hack across all the parties involved is likely over $350 million. Story by Tom Gara for The Wall Street Journal.
Paltry Credit Card Debt Growth Signals Restrained Consumer
The latest data on consumer credit is due out Thursday. Non-revolving debt like auto and student debt has been growing gangbusters. But you have to squint to see the rise in credit card debt. Data from the Labor Department showed hourly wages growing at just a 2% year-on-year clip, even though some survey data point to better wage acceleration than that. Another measurement of wage costs, the somewhat cumbersome unit labor costs, comes Friday. “Incomes are only growing so much,” said Josh Shapiro, chief economist at MFR. “[Consumers] are not going to go two-fisted on credit card and auto debt.” Story by Steve Goldstein for MarketWatch.
American Express CEO Defends Its Merchant Practices
American Express Chief Executive Kenneth Chenault took the witness stand in the government’s antitrust case against the New York card company, testifying that it has been hurt badly when merchants steer customers away from using AmEx plastic. AmEx says a push to remove those restrictions would hurt its business. The company has had the merchant rules in place since it began issuing charge cards on purple paper in 1958. AmEx funnels the fees it collects from merchants into other areas of the company, such as its well-known incentive program called Membership Rewards. Mr. Chenault said the program is a significant factor that makes AmEx distinct from other card companies and “provides substantial value to the cardmember and merchant.” Story by Robin Sidel for The Wall Street Journal.
High Credit Card Debt Increases Risk of Depression
According to a study from Rutgers University, older adults with a high level of unsecured debt are much more likely to exhibit symptoms of depression compared to people with secured debt. Unsecured debt is debt that has no physical property or other form of collateral supporting it. Examples include credit cards, unsecured loans and unpaid medical bills. The research indicates that 30% of adults over the age of 51 have some form of unsecured debt. The higher the debt-to-income ratios were for these adults, the more likely they were to show symptoms of depression. Story by Bill Hardekopf for LowCards.com.
The Low-Fee Bank Accounts You’ve Never Heard Of
Some of America’s banks have a dirty, little secret: low or no-fee banking options for people who qualify. And given the number of Americans who can’t or don’t use banks, that could be a lot. Most of these options don’t make the banks much, if any, money, so they don’t actively promote them. A study released this week by the Consumer Financial Protection Bureau showed that banks generate more than half their profits on checking accounts through overdraft fees of $34 that exceeded the value of the items being overdrawn (on average $24). Some of the new options are from smaller startups. And for customers who don’t always meet a bank’s requirements for free checking and savings accounts, the monthly maintenance fees can be cheaper. These alternative accounts offer options for the country’s rising number of “unbanked”–which climbed from an estimated 9 million in 2009 to 17 million in 2011–to use traditional financial services and avoid even heftier fees at check cashing and payday loan facilities. Story by Ben Popken for NBC News.
Banks Burdened with Compliance Costs Outsource Home Loans
Lenders are backing away from home loans as an array of new regulations in the aftermath of the housing crash push up compliance costs. Banks lost an average $194 a mortgage in the first quarter, according to the Mortgage Bankers Association. The losses may spur banks to increase outsourcing of home loans by $180 billion a year while keeping their brand name on the mortgage. Story by Kathleen M. Howley for Bloomberg.
LowCards.com Weekly Credit Card Rate Report
Based on the 1,000+ cards in the LowCards.com Complete Credit Card Index, the average advertised APR for credit cards is 14.47 percent, slightly lower than last week’s average of 14.49 percent. Six months ago, the average was 14.48 percent. One year ago, the average was 14.35 percent.