LowCards Weekly Credit Card Update July 13
Price of Plastic Going Up? Merchants May Get Surcharge Rights
Merchants may soon begin to impose a surcharge each time a customer pays with a credit card, a practice Visa and MasterCard currently prohibit. Retailers have long pushed for the right to charge extra to customers who pay with plastic versus cash, saying the practice would help defray their costs for accepting credit and debit cards. Merchants pay transaction fees on each card swipe. But Visa and MasterCard, which operate the world’s largest card-payments networks, ban the practice in the U.S. as part of rules they require retailers to follow to accept their cards. That ban is expected to be eliminated or altered, though, under a potential settlement of long-standing lawsuits retailers have brought against the card networks and numerous banks that issue their cards. Story by Andrew Johnson for The Wall Street Journal.
A Scandal Over Rate-Fixing is About to Hit the U.S.
It may seem like just another obscure banking scandal at a 322-year-old British bank, but there are a number of good reasons why you should care about the LIBOR rate-rigging scandal now roiling the world’s biggest and most powerful banks, including that it probably cost you money if you own a mortgage. In late June, Barclays paid $453 million to regulators in the U.K. and the U.S. to settle accusations that it had tried to influence LIBOR, or the London interbank offered rate. The rate is the benchmark for setting payments on some $360 trillion worth of financial instruments, ranging from credit cards to more complex derivatives, such as futures contracts.The potential scope of the unfolding scandal, now acquiring global significance, is enormous. Other banks that have disclosed that they are under investigation for LIBOR manipulation include big U.S. banks, such as Citigroup and JPMorgan Chase, and also HSBC, Deutsche Bank and the Royal Bank of Scotland. Story by Roland Jones for MSNBC.
Regions Financial Joins Small Banks’ Push Into Credit Cards
Regions is rolling out a new line of credit cards this week, becoming the latest regional lender aiming to grow its card products and take on big players like Discover and Chase. The push comes as new restrictions on other products and increased competition for customers put a crimp on revenue growth for most lenders. By offering or expanding credit card offerings, Regions and other banks potentially could generate new revenue sources; however, the move also comes with the risk of higher credit losses. Other regional players also have beefed up their card products in recent months. Regions isn’t likely to rank among the largest credit card issuers anytime soon. Its $1 billion portfolio compares with Chase’s $130 billion and Bank of America’s $112 billion in outstanding U.S. card loans last year, according to the Nilson Report, a payments-industry newsletter. Nonetheless, pushing credit cards could help regional banks recoup lost fee income, which has been hit by new rules that limit the fees merchants pay banks to accept debit cards and that require banks to obtain customers’ consent before enrolling them in debit card overdraft programs. Story by Andrew Johnson for the Wall Street Journal.
Consumers Can Be Hurt By Banks Increasing Transaction Speed
BBVA Compass is notifying customers that it is “improving transaction speeds.” ATM withdrawals and debit card purchases by signature or PIN will post immediately. Online bill payments, automatic debits and checks drawn from your account will post throughout the day. The new processing goes into effect on August 6. Faster transaction processing means quicker updates to your balance and this will affect the way you manage your account, especially during times when money is tight. This faster processing can increase the chances of insufficient funds and overdraft fees because of the unfortunate timing of a deposit or a withdrawal. Deposits may be processed immediately but the funds may not be available right away for withdrawal. It is up to the consumer to know how much is available in the account before you make any purchase. Story by Lynn Oldshue for LowCards.com.
Consumer Financial Protection Bureau Got Off to a Good Start in its Inaugural Year
With the Consumer Financial Protection Bureau approaching its one-year anniversary on July 21, I looked back at the agency’s rookie year. Overall, I would say the consumer watchdog gets a “meets expectations” in its evaluation for accomplishing its primary goal of becoming an unapologetic protector of consumers. This first year, the agency has done a lot of fact-finding. It has asked the public–consumers, the financial services industry and consumer advocates–to weigh in on a number of issues, from credit cards and credit reporting agencies to student loans and mortgages. Perhaps the agency has become best known for its “Know Before You Owe” initiative, which aims to help people understand the consequences of the debt they take on. It’s a campaign that could have its biggest impact in the long term. We needed a pit bull-type agency to protect consumers. In its inaugural year, the Consumer Financial Protection Bureau is doing a pretty good job of just that. Story by Michelle Singletary for the Washington Post.
New Clients, Old Problems for Prepaid Debit Cards
Chris Williams, a solidly middle-class family man, is so wary of banks and overspending, that he has become the new face of prepaid debit cards. The 49-year-old executive at a public relations firm in Meredith, New Hampshire, swore off credit cards in favor of a prepaid debit card before a trip to New York last year, hoping it would keep a lid on the family’s spending. It soothed him to know the card walled off financial information that thieves can potentially steal from credit card companies. The experience proved so positive, Williams plans to continue using the card, even though the charges for using prepaid cards can far exceed the costs associated with using credit cards, checking accounts or other forms of payment. Indeed, experts caution that these cards aren’t right for everyone and that consumers need to look past the vigorous marketing pushes by prepaid card firms that use celebrity faces or folksy, anti-Wall Street messages to lure new, middle-class customers. Story by Beth Pinsker Gladstone for Reuters.
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 14.33 percent, slightly higher than the 14.32 percent last week. Six months ago, the average was 14.04 percent. One year ago, the average was 14.11 percent.