LowCards Weekly Credit Card Update August 31
The prepaid debit card is the new man on campus. Amid stricter regulations on promoting credit cards on college campuses, some financial firms are instead pitching prepaid debit cards. These cards, loaded with money but typically not linked to a bank account, can hold everything from financial-aid funds to an allowance. But like other prepaid cards, they can come with some costs. Story by Rachel Louise Ensign for the Wall Street Journal.
Consumers Cut Up Credit Cards But Buy Cars
Americans continued to shy away from credit cards in the second quarter, but kept taking out auto loans. Credit card balances declined to $672 billion, down 22.4% from their peak at the end of 2008, according to the Federal Reserve Bank of New York’s quarterly debt report. At 10.9%, credit card delinquencies are at their lowest level since the end of 2008. And credit inquiries, an indicator of demand, fell for the second consecutive quarter. Overall, consumers continued to shed debt, the report found. Household indebtedness declined to $11.38 trillion, a $53 billion decline from the first quarter. The drop was driven by declines in mortgages and home equity lines of credit. Story by Tami Luhby for CNN.
Tip O’ The Morning To You
It’s the first tip jar that takes plastic! DipJar is a new credit card scanner shaped like a tip jar that makes it easy for patrons who pay with credit cards to show their appreciation for good service at coffee shops and bars. Ryder Kessler, 26, said he dreamed up the gadget after watching baristas go tipless as a cashless crowd came through a cafe near his West Village home. “Everyone was paying with credit or debit, so the tips had plummeted,” Kessler said. “Baristas take really great care of me, and I didn’t like that they were working just as hard and making less money.” Story by Amber Sutherland for the New York Post.
Appeals Court Says Amex Can Force Arbitration in Card Dispute
In a blow to consumers, a federal appeals court in New Jersey ruled that American Express can force a disgruntled cardholder into arbitration. In a long-running dispute, an American Express customer alleged that Amex engaged in “bait-and-switch” solicitation and marketing of its “Blue Cash” credit card when describing cash rebates on purchases. He had sought class-action status on behalf of a group of cardholders, while Amex had argued the company’s credit card agreement required arbitration on an individual basis. The court found that the credit card company could compel arbitration, even though the significant cost of arbitrating his claim and the potential for limited recovery would make it unlikely an attorney would take the case. Story by Chad Bray for the Wall Street Journal.
Retail Card Issuers Loosening Credit Standards
The issuers of retail credit cards seem to be significantly easing their credit standards, according to data from Equifax’s August National Consumer Credit Trends Report. The number of open retail credit card accounts reached a 31-month high in July, exceeding 175 million for the first time since December of 2009. These new retail accounts are coming with higher credit limits, making it easier for new consumers to charge more. Credit limits on these new accounts totaled $25.1 billion for the January through May period, an increase of more than 16 percent from the same period last year. Story by Bill Hardekopf for LowCards.com.
Bank of America Simplifies Fee Disclosure Amid Pressure
Bank of America is joining a handful of other large banks that have decided to make checking-account terms and fees easier for consumers to understand. For more than a year now, an arm of nonprofit Pew Charitable Trusts has been urging financial institutions to voluntarily adopt its one-page model disclosure form for summarizing checking-account policies and costs. The nonprofit says bank disclosure forms often include dozens of pages of legalese and fine print, making it much too difficult for consumers to find key information on checking-account features, such as overdraft fees. Pew is urging the Consumer Financial Protection Bureau, created in wake of the 2008 financial crisis to regulate financial products, to require all financial institutions to use more streamlined disclosure forms, make overdraft options easier to understand and to limit overdraft penalty fees. Story by Maya Jackson Randall of the Wall Street Journal.
How An Obscure Bond Play Could Help Consumers
For consumers struggling to find decent deals on everything from new cars to credit card purchases, a recent uptick on an obscure corner of Wall Street suggests relief may be on the way. Sales of credit card and auto loan “securitizations”–which plunged from $178 billion at their peak in 2007 to a low of just $65 billion two years ago–are on pace to exceed $100 billion this year, according to ratings agency Standard & Poor’s. And that trend, if it continues, could mean lower rates and easier credit for borrowers. Since the 2008 financial crisis, would-be borrowers have often criticized banks for being stingy about lending. But a big part of the credit-market problem, experts say, is that financial firms haven’t been able to bundle such loans into bonds and sell them off to giant investors like pension funds and insurance companies. Credit card bonds are indeed on the mend. But consumers may not see benefits as quickly in this arena as they have with auto loans. Story by Ian Salisbury for SmartMoney.
LowCards.com Weekly Credit Card Rate Report
Based on the 1000+ cards in the LowCards.com Complete Credit Card Index, the average advertised APR for credit cards is 14.36 percent, identical to last week. Six months ago, the average was 14.27 percent. One year ago, the average was 14.09 percent.