LowCards.com Weekly Credit Card Update–November 18, 2016
Here’s Why You Don’t Want a Store Credit Card, No Matter How Big a Discount it Offers
For a frequent shopper, nothing is better than a good discount—especially during a holiday spending spree. In fact, more shoppers sign up for store credit cards–which often entice customers with a percentage off their purchase at sign-up–during the holidays. Discount retailers, online stores, and jewelry stores nearly double their sign-ups in the month of December. Since December 2014, the overall number of consumers with store credit cards has steadily risen, from 123.7 million to 125.3 million in the third quarter of 2016. Signing up for a store credit card will typically get you on a mailing list that will offer more discounts and reminders for upcoming sales. And though it may seem like a sweet deal on the surface, it’s generally not a smart financial move. Even if you save $100 in a year using your store credit card, there’s a strong chance you spent more just to save that. Store cards also have much higher interest rates, sometimes around 25%. Story by Tanza Loudenback for Business Insider.
What Surging Interest Rates Mean for Your Credit Cards, Auto, Student and Home Equity Loans
Credit card interest rates move slightly from week to week, but the big jumps occur after the Federal Reserve moves on rates. Card rates are generally variable and pegged to the prime rate. An increase in the federal-funds rate next month would result in an almost immediate increase-of the same amount-in credit card interest rates. Other factors, including card issuers’ outlook on the economy, can impact rates. Credit card rates are comprised of the prime rate plus the margin that lenders tack on. Lenders could raise the margin, say, if they become concerned that another recession is on the way, or if there isn’t a clear plan for how the new administration will overhaul financial regulation. Story by AnnaMaria Andriotis for The Wall Street Journal.
Across Channels, Credit Cards Are Most Trusted for Payment
Internet users are more likely to name credit cards as the safest payment method for their purchases, whether in-store or offline, than any other method. But the two channels had very different runners-up. More than two in five internet users who owned both a debit and a credit card said credit cards were the safest way to buy online, and 35% said they were also safest in brick-and-mortar stores. In stores, cash came very close, however: 32% of internet users said it was the safest way to pay. Online, meanwhile, PayPal was a somewhat more distant No. 2. Debit cards, meanwhile were named safest by just 12% of internet users when buying online, while 18% of those surveyed said they were the safest in-store. Story in eMarketer.
Goldman Sachs Targets a New Kind of Customer: People in Credit Card Debt
If you’ve racked up some credit card debt-or plan to sometime down the line-Goldman Sachs is looking for your business. In a series of ads that have appeared on platforms like YouTube, Hulu and Pandora, Goldman Sachs is promoting its new line of personal loans-named Marcus, after the bank’s founder-to consumers burdened by credit card debt. The bank launched the product last month to a select group of customers with credit scores above 660, sending them a code by mail to apply for unsecured, no-fee loans on Marcus.com to refinance credit card debt and fund household projects. The loans can range in amount from $3,500 to $30,000. They can be paid back in terms between two and six years, with average rates of 12 to 13%, a few percentage points below typical credit card rates. Story by Kerry Close for Money.
Over 400 Million Accounts Exposed in FriendFinder Data Breach
FriendFinder Networks is investigating claims that the personal information of more than 412 million users was stolen from five of the company’s sex-chat, pornography and online dating sites. LeakedSource first reported the possible breach, saying 20 years of customer email addresses and passwords were stolen. 340 million of the stolen records were taken from AdultFriendFinder, a site which helps users find casual relationships. However, many of the records are from inactive accounts, and others may have been duplicates or created by “bots,” which are automated programs. In February, AdultFriendFinder reported more than 60 million users. Story by Lynn Oldshue for LowCards.com.
Why Big Banks Would Do Well to Spin Off Credit Cards
The credit card industry has emerged from the great recession once again as the most profitable bank lending business. According to the FDIC, the average ROA for all depository institutions at June 30 was 1.06%, but the average ROA for the credit card line of business was 2.27%. This is not an anomaly–this relatively higher level of profitability has long been a characteristic of the credit card business. From a traditional M&A perspective, virtually any of the large credit card businesses could expect to sell at a considerable premium to book value. The next consideration is a bit more complicated. A bank would have to ask: Does the greater scale associated with being part of a systemically important bank outweigh the increased regulatory burden? For many banks, a credit card sale or spin-off would generate significant capital at a time when virtually all banks are still feeling regulatory pressure to increase “common equity Tier 1. Story by John A. Costa for American Banker.
Uber Debuts Prepaid Commuter Cards
Commuting in some big U.S. cities may get a bit cheaper through the use of prepaid cards, thanks to Uber. Uber said on its website that riders can use commuter prepaid cards to pay for uberPOOL, its carpool ride service. The firm noted on its site that the use of pretax dollars implies that riders can save as much as 40 percent on commuting expenses. Uber also said that existing users can add these benefits to their payment options by adding the prepaid card number. Initially, the prepaid offerings are being made available in Boston, New York City and Washington, D.C., said Uber. The service itself, when using the prepaid cards, will connect riders only with Uber drivers piloting full-sized vehicles. Uber also cautioned that wait times for rides utilizing the new feature will have “slightly longer” estimated times of arrival. uberPOOL is up to 55 percent cheaper in some locations than uberX due to carpool riders sharing the cost of a single ride, the firm has stated. Story in PYMNTS.
Travelers Are Turning to Credit Card Disputes When Other Routes to a Refund Have Failed
Could disputing a credit card charge solve your next travel problem? For better or worse, travelers are turning to a last-ditch tactic to resolve their disagreements with airlines, car-rental companies or hotels: instigating credit card disputes. Chargebacks are on the rise in travel. A chargeback voids a credit card transaction by withdrawing funds that were previously deposited into a merchant’s bank account and applying credit back to your card. Think of it as a way to reverse your charges. And even though experts caution against using this tack because you don’t enjoy a vacation or disagree with an unfair policy, the odds are in your favor. Story by Christopher Elliott for the Washington Post.
Do You Venmo? FTC Spotlight on Peer-to-Peer Payments and Crowdfunding
The FTC recently examined peer-to-peer (P2P) payment systems and crowdfunding in the second forum of its FinTech series. P2P payment systems are online services that allow consumers to share money electronically. These platforms enable the immediate transfer of money between consumers, typically for free or for a small fee. In the panel discussion of P2P payments, the following themes emerged: P2P payments have been transformational to the online payment industry and have changed consumer expectations about how money is being moved; these platforms likely will be disproportionately targeted by sophisticated hackers; and there are high barriers to entry into this market, in terms of cost and regulatory risk. Story by Sharon Kim Schiavetti and Dana B. Rosenfeld for Ad Law Access.
Banks ‘Must Consider Human Weakness’ to Improve Mobile Banking Security
Banks must consider the weakness of their own consumers’ behaviours and avoid being distracted by technical vulnerabilities when it comes to improving the security of mobile banking and payments systems. Mobey Forum, the global industry association for banks and financial institutions, says “human fallibility is now one of the biggest risks” their members face when managing mobile financial services. The group’s Risk Mitigation Workgroup says banks must pay close attention to the high risks associated with criminal targeting of end-users, through “social engineering and phishing”, together with fraudulent impersonation of customers during the enrollment and installation of new apps and services. Story by Christopher Brown for NFC World.
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 14.65 percent, identical to last week’s average. Six months ago, the average was 14.72 percent. One year ago, the average was 14.64 percent.