LowCards.com Weekly Credit Card Update–December 22, 2016
The 10 Biggest Hacks, Breaches, and Security Stories of 2016
It’s been a long, depressing, breach-filled year in the world of computer security. Yahoo broke the record for allowing the largest hack in history-twice. Millions of zombified webcams and DVRs took down the Internet for users in the United States. Russia was accused of “hacking the vote,” and a new type of malware earned a tidy profit extorting unsuspecting users for Bitcoin. Story by Ian Paul for PC World.
Large Banks Not Following Best Overdraft Practices
Many of the largest U.S. banks are charging high, and often multiple, fees when customers incur overdrafts, according to research released today from The Pew Charitable Trust. In addition, more than two in five banks are rearranging transactions so that these overdraft fees are maximized. Things are no better at small banks, where overdraft programs are similar to those at larger banks. Pew compiled their results based on disclosures from the 50 largest U.S. banks, and found service charges, including nonsufficient funds and overdraft fees, have more than doubled in the past three decades, while interest income has decreased. Most banks charge at least $35 each time an overdraft is incurred. More than 40% of banks are processing transactions from the largest to smallest dollar amount, which reduces a bank balance more quickly and could result in additional overdrafts. Nearly 80% allow overdrafts on ATMs and point-of-sale transactions. Story by Bill Hardekopf for LowCards.com.
Credit Card Rates Are Going Up and May Keep Rising
Card debt could grow even more expensive for consumers next year if the Fed follows through on plans to keep moving rates higher. Lenders base the rate they charge on credit card balances on the “prime” rate, which generally tracks the Fed’s benchmark and rose a quarter of a percentage point to 3.75% this week. The prime rate is set individually by banks as their lowest lending rate, although the rate generally referred to is a consensus of rates at large banks surveyed by The Wall Street Journal. A rough rule of thumb is that the prime rate is the fed-funds rate plus 3 percentage points. For many cardholders, that was likely one of the first times their rates increased in over five years, along with an equal increase in the prime rate in December 2015. If the prime rate were to move up a total of 1 percentage point, the additional annual cost to consumers would be nearly $6 billion, according to a recent report by the U.S. Consumer Financial Protection Bureau. Story by Peter Rudegeair and AnnaMaria Andriotis for The Wall Street Journal.
Younger Consumers Reaching for Credit Cards
Are the notoriously credit card-shy millennials getting more comfortable with debt? Perhaps. A new survey has found that two out of three young adults now use credit cards, up from just half of them in 2013. And for the first time since 2009, consumers between the ages of 25-34 are more likely than the average consumer to reach for plastic, according to a new survey. After the Great Recession in which they saw their parents lose their homes, delay car purchases, and cut back on spending to pay off debt, many young adults put their credit cards away–or never applied for one. According to the latest data available from the Federal Reserve, 37 percent of households under 35 had credit card debt in 2013, down from 49 percent in 2007—the lowest level since the central bank started keeping track in 1989. Many younger consumers opted for debit cards instead, ensuring that they only spent what they had in their bank accounts. Story by Deirdre Fernandes for The Boston Globe.
9 Ways Credit Cards Can Reduce Shopping Stress
Whether you’re pulling out the plastic for Secret Santa gifts or last-minute getaway flights or a rental car that’ll take you to Grandma’s, use a credit card instead of a debit card. Not only will you build up rewards points, but you’ll benefit from protections in case items you order online arrive broken or go on sale after you get them. Paying with a credit card can also pay off if your bags accidentally wind up on a flight to Alaska or your tire blows in the middle of nowhere. Many credit cards have little-known protections that come in handy when something goes wrong with a purchase made on the card. Story by Emily Bary for Barron’s.
Costco’s Most Disappointing Product of 2016 was its Store Credit Cards
Costco shoppers may have noticed shorter lines at the warehouse retailer lately. In fact, the company just posted its weakest customer traffic growth pace in almost six years. No one expected Costco to keep up its 4% traffic expansion rate forever. Yet in switching its co-branded store credit card from American Express to Visa, the company likely contributed to the slump by putting its membership base through a major disruption. Sure, it’s almost certainly a long-term positive for the business. But Costco’s credit card change generated major challenges this year. Story by Demitrios Kalogeropoulos for Business Insider.
Students Advised to Be Wary of College-Sponsored Debit Cards
Debit cards marketed on many college campuses often aren’t designed with students’ best interests in mind, a new report has found. The Consumer Financial Protection Bureau analyzed more than 500 marketing agreements between colleges and banks that were filed with the federal Department of Education and found that cards issued under many contracts may lead students to pay excessive fees. About 10 million students, or about 40 percent, attend a college that has signed a deal with a bank to market debit cards to students, the bureau says. Certain types of campus-sponsored debit cards–those that are used to distribute student financial aid left over after the cost of tuition and fees are deducted – now carry protections mandated by the Department of Education. Such cards, for instance, cannot charge overdraft fees, which are penalties charged when students overspend their accounts. A typical overdraft fee is $35. But the new restrictions, which took effect for the current academic year, do not apply to other debit cards that are marketed to students outside the financial aid system. These cards may double as a student identification card or may appeal to student loyalty by displaying the school’s logo. But the marketing agreements often emphasize revenue for the school and the banks rather than the financial interests of students, the bureau found. Story by Ann Carrns for The New York Times.
J.P. Morgan Chase Offers Consumers Free Credit Scores
The mystery about credit scores is getting easier to solve. J.P. Morgan Chase’s credit card unit said that it is launching a new website that will provide consumers with their credit score and allow them to see how certain financial actions will affect it. The website, which is open to customers and non-customers of the bank, is the latest move by credit card issuers to give consumers a better understanding of how credit scores work. Many consumers have long been bewildered by the nature of credit scores that can affect the ability to borrow and be hurt by a wide range of factors, including if a credit card account is closed or if a shopper applies for too many cards. The free Chase service, called Credit Journey, provides a VantageScore, a credit rating that was launched a decade ago by credit-reporting firms Equifax, Experian and TransUnion. It competes with Fair Isaac, known as FICO, which is the score used by most lenders in deciding whether to extend credit. Story by Robin Sidel for The Wall Street Journal.
Lloyds to Buy Bank of America’s British Credit Card Business
Lloyds Banking Group will buy Bank of America’s British credit card business for about $2.4 billion, signaling a major turning point for Lloyds eight years after a government bailout. The deal for the business, called MBNA Limited, will bolster Lloyds’s consumer finance business in Britain by adding about 7 billion pounds, or $8.7 billion, in assets. Lloyds also said its market share in the British credit card market would rise to more than a quarter from 15 percent, a level that would bring it closer to Barclays, the largest provider of credit cards in Britain with a share of nearly 30 percent. The deal culminates years of upheaval and reorganization at the bank, which the British government bailed out in the middle of the 2008 global financial crisis. The British government at one point owned more than 40 percent of Lloyds. Story by Chad Bray for The New York Times.
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 14.90 percent, slightly higher than last week’s 14.89 percent. Six months ago, the average was 14.70 percent. One year ago, the average was 14.62 percent.