LowCards Weekly Credit Card Update November 4
DEBIT FEE RETREAT COMPLETE
The banking industry’s brief experiment with charging customers to use their debit cards appears to be over. The about-face concluded on Tuesday when Bank of America Corp. dropped plans to charge customers $5 a month for using their debit cards to make purchases. Bank of America was the last major bank to back away from the fees, representing a swift retreat in an industry that is at times known for its lumbering decision-making. More fees are expected. Banks have already eliminated the free checking accounts that had been in place since the 1980s and dismantled rewards programs for debit cards. Banks now may raise existing fees on checking accounts, find new places for additional charges and institute more internal cost-cutting.
Story by Robin Sidel and Dan Fitzpatrick for the Wall Street Journal
ECONOMY TOP CONCERN AMONG SHOPPERS AT START OF HOLIDAY SEASON
As we approach the 2011 winter holidays, Americans remain fixated on finances: their own and that of the nation. Four in 10 of those surveyed by Consumer Reports said their biggest concern going into the holidays was the state of the economy and having enough money in their own pockets. Last year, more than half–53 percent–of Americans paid for some or all of their purchases with plastic, charging $433, on average, worth of gifts. That’s slightly higher than the percentage that relied on credit the previous year. However, heavy credit card users have mended their ways at least somewhat. The percentage of shoppers who charged $1,000 or more dropped in 2010 to 16 percent, down from 23 percent in 2009. Unfortunately, too many consumers still carry too much debt for too long. As of this month, 6 percent of Americans–around 14 million people–were still paying off their credit-card purchases from the 2010 holidays.
Story by Tod Marks for Consumer Reports
MASTERCARD PROFIT UP 38% AS CARD USE RISES
MasterCard said Wednesday its third-quarter profit soared 38 percent on a big spike in card use around the world. The payments processor also attributed the strong results to new deals with certain banks to issue debit cards bearing its logo and new transaction processing deals overseas. In the U.S., spending was up 13 percent to $227 billion. Visa and American Express said most of the increased spending in the U.S. they saw last quarter came from affluent card users, a cause for some concern as it reflects broader weakness for the economy. Big increases in purchases in Latin America and the Asia-Pacific-Middle East region led overseas gains. The company’s worldwide footprint has helped to partially insulate it from economic woes in the U.S. and Europe. MasterCard has far fewer debit cards in use than Visa, but its revenue from those cards is growing faster. MasterCard said U.S. purchases with its debit cards rose 23 percent to $97 billion.
Story by Eileen AJ Connelly for the Associated Press
U.S. BANKS TO PUSH PREPAID CREDIT CARDS
U.S. banks that have lost debit card processing revenue due to new caps on fees will likely push customers into prepaid and credit cards and other types of account fees. Executives for regional banks–including
BB&T, SunTrust, Fifth Third Bancorp and Sovereign Bank–said at an industry conference that there is no one solution for recovering as much as $8 billion in lost revenue under new caps on what banks can charge
merchants for processing debit card transactions. But lenders will charge customers fees for their overall banking accounts, rather than just debit card use, and push the use of prepaid and credit cards not covered by new debit card rules.
Story by Joe Rauch for Reuters
WATCH OUT FOR THESE FIVE CREDIT CARD GOTCHAS
Credit card issuers are back to inundating consumers with offers, many of them featuring low teaser rates, but be sure to read the fine print before signing on. Consumer Reports did just that, analyzing dozens of credit card offers. Here are some typical gotchas to be aware of: seasonal savings, spending tiers, expiration dates, hidden caps, missed payment penalties. More consumers are being approved for new credit cards; only 14 percent were denied a card in 2011, compared with 24 percent last year, according to new survey data from the Consumer Reports National Research Center. But 35 percent of respondents also reported experiencing at least one credit card problem, such as a new annual fee, higher interest rate, lower credit limit, or limits on rewards.
Story by Maggie Shader for Consumer Reports
A PROGRAM THAT REWARDS NOT SPENDING
For years, credit cards have been offering rewards to consumers who spend. Now, a new company does just the opposite: it rewards consumers who save. And the prizes are eye popping: a trip to Hawaii, a Toyota Prius, a $50,000 college scholarship. The catch? Good luck getting them. Launched today, SaveUp rewards consumers who pay down their debt or put more cash into their bank accounts. Here’s how it works: consumers link their debts (including credit cards, car and student loans, mortgages etc.) and bank accounts from pretty much any U.S. bank to their SaveUp account. The site automatically awards 1 credit for every dollar saved or every dollar of debt paid off. Not only is it encouraging healthy financial behavior, but consumers can rack up rewards points much faster than when they swipe their credit card. Most credit cards give just one to three cents back on every dollar a consumer spends. And there’s no cost to using SaveUp–it’s free to all consumers. At SaveUp, on the other hand, all that’s guaranteed is a chance to win the big prizes in a kind of lottery drawing. Consumers can use their points to play games–like scratch offs, drawings and jackpots–for a shot at prizes. Each game, no matter the prize, costs 10 credits, which is equal to $10 that a consumer has saved or paid down in debt.
Story by AnnaMaria Androitis for SmartMoney