LowCards.com Weekly Credit Card Update–November 15, 2013
Credit Card Debt Declines for Fourth Straight Month
U.S. credit card balances declined for the fourth consecutive month in September, suggesting rising caution among the nation’s consumers. Revolving credit, which largely reflects money owed on credit cards, fell by a seasonally adjusted $2.06 billion in September, or at a 2.91% annual rate, the Federal Reserve said Thursday. Nonrevolving debt, mostly auto and education loans, increased by $15.80 billion, or at an 8.7% annual rate. Story by Jeffrey Sparshott for The Wall Street Journal.
Study Finds CARD Act Saved Consumers $20 Billion Annually
A recent study by the Social Science Research Network shows the CARD Act may have saved credit cardholders over $20 billion annually since its implementation. The study found that regulatory limits on credit card fees reduced overall borrowing costs by an annualized 2.8% of the average daily balances. There was decline of more than 10% for consumers with the lowest FICO scores. It did not find evidence of an increase in interest charges or reduction in access to credit that many predicted banks would use to offset the regulations. Story by Lynn Oldshue for LowCards.com.
Nilson Reports 20-Year First: Credit Tops Debit
The Nilson Report, a noted payments industry newsletter, has reported that debit cards lost purchase volume and transactions to credit cards in 2012. This seemingly small shift, if accurately calculated, would reverse a 20-year trend which has seen debit cards continue to take purchase volume and transactions away from credit cards, along with checks and cash. According to the company, credit cards accounted for 52.82% of spending in 2012 compared to 47.18% for debit cards, while in 2011 credit cards accounted for 52.63% and debit cards accounted for 47.37% of $4.301 trillion in purchase volume. The firm also forecast the trend continuing, suggesting that by 2017, 54.72% of transaction volume would go to credit cards and 45.28% to debit cards. Story by David Morrison for Credit Union Times.
Credit Card Application Rules Eased
For anyone whose credit card application was denied because of their stay-at-home status, it might pay to reapply. On November 4, the Consumer Financial Protection Bureau lifted a restriction that had prevented stay-at-home partners, among other people, with access to cash but no individual income, from applying for credit. Story by Lindsay Gellman for The Wall Street Journal.
Cash-Only Business Owners Risk $100 Billion Mistake
If cash has an added cost for the consumer reaching into the hundreds of billions annually–as one recent study found–the jury is still out on the lost sales opportunity among cash-only merchants. Sales from new customers may sustain the offsetting of expenses incurred by card processing fees. According to a report by Javelin Strategy & Research, 27% of all in-person point-of-sale purchases were made with cash in 2011, while payments made with plastic cards–debit and credit–comprised 66%, and that is expected to rise. 55% of the nation’s 27 million small businesses don’t accept credit cards, according to Intuit. By not accepting cards, those 15 million businesses are missing out on $100 billion in sales annually–roughly $7,000 per company a year in either new sales or sales that go to competitors that do accept cards, said Intuit. Story by Maggie Overfelt for CNBC.
How South Korea Became a Credit Card Nation
Over the course of two decades, South Korea quickly morphed from a country of savers to a nation of spenders and borrowers. The country now holds the most credit cards per capita in the world, according to statistics from the Bank of Korea, with five times as many credit cards as people. Young-Sik Jeong, a research fellow at the Samsung Economic Research Institute in Seoul, tracks household debt in South Korea. In 1990, he found, Koreans saved on average 22.2% of their net household incomes. By 2012, that figure had dropped to 3.4%. And the ratio of household debt to disposable income in 2012 was 160–higher than the U.S. in 2007 before the housing bubble burst. Story by Christina Larson for Bloomberg Businessweek.
British Airways Card Brings Back 100,000 Mile Bonus
British Airways Visa Signature Card has brought back its 100,000 mile rewards program. The rewards can also be converted to AAdvantage points to be used on American Airlines.There are some steep spending tiers that are needed to qualify for the 100,000 miles bonus: 50,000 after spending $2,000 on the card in the first three months of being a cardholder, 25,000 after spending $10,000 on the card in the first year, 25,000 after spending an additional $10,000 on the card in the first year. There is also a $95 annual fee on the card. Story by John Oldshue for LowCards.com.
How Not to Suck at Understanding Credit Card Rewards
From rewards points to airline miles to cash back, there are many, many ways to earn so-called rewards by using a credit card. But rewards programs are often confusing and are sometimes limited by byzantine rules that can make them worthless or cause points to vanish into thin air. While researching this story, I decided I should check in on my own rewards–something I admit I haven’t done in years. After about an hour on the phone with ridiculously peppy customer service reps, I had redeemed enough points to give me more than $1,800 of credits on my credit card statements, and I arranged for another $75 of gift cards to be delivered to my home. I also got a bonus of five times the points on new purchases between now and the end of the year on one of my cards (I didn’t even have to ask), plus two 0% balance transfer offers that I’m not planning to take. Why did I suck? I also learned I had let enough points expire that could have meant another $1,500 in cash or account credits. Story by Karin Price Mueller for The Consumerist.
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 14.45%, identical to last week. Six months ago, the average was 14.26%. One year ago, the average was 14.29%.