LowCards Weekly Credit Card Update September 21
Cordray Says Credit Cards Yield Fewer Complaints Than Expected
The U.S. Consumer Financial Protection Bureau hasn’t fielded as many complaints about credit cards as it anticipated when it began operating last year. “We have fewer complaints about credit cards than I would have expected,” Richard Cordray, the CFPB’s director, said as he presented the bureau’s semi-annual report to Congress. The CFPB started a consumer response system on July 21, 2011, and began by taking complaints on credit cards. It subsequently expanded the system to include mortgages on Dec. 1, then bank accounts and services, private student loans, and consumer loans on March 1. Cordray attributed the lower-than-expected volume of complaints on credit cards to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which banned a number of practices that Congress deemed abusive, and to the industry’s efforts to improve customer service. Cordray also confirmed that the CFPB will write a regulation on prepaid debit cards. Story by Carter Dougherty for Businessweek.
Groupon Launches Credit Card Payment Business
Groupon Inc, the world’s largest online daily deals provider, launched a payment business on Wednesday and entered a crowded field where it will compete aggressively on price with eBay Inc’s PayPal and start-up Square Inc. The service, called Groupon Payments, lets U.S. restaurants, salons and spas, retailers and other businesses that run Groupon daily deals accept credit card card payments at a lower rate than other providers. In a typical local deal, a customer could pay $20 for a voucher worth $40 of goods and services. Groupon will charge 1.8 percent for MasterCard, Visa and Discover cards, on top of a 15 cent per-swipe fee. For American Express cards, it charges 3 percent plus the 15 cent fee. Groupon aims to reach a size where it will become the “operating system” for local commerce. Story by Alistair Barr and Nivedita Bhattacharjee for Reuters.
No Relief Expected on Credit Card Interest Rates
The Federal Reserve is again locking the lid on interest rates in an ongoing attempt to stimulate the economy. The Fed announced last week it would keep the federal funds rate at the historic low of zero to 1/4 percent, at least through mid-2015. The lower rate is pressing mortgage rates to record lows, but has not had the same effect on credit card rates. The interest rate on most credit cards is influenced by the prime rate, but lending risk is a much bigger factor in determining a consumer’s interest rate. Story by Bill Hardekopf for LowCards.com.
Few Rewards with Gas Credit Cards
Don’t waste your wallet space with gas credit cards. They tend to be costly with few rewards and don’t have the flexibility of a general-purpose credit card, experts say. Like department store cards, gas cards typically carry low credit limits and interest rates that hover at about 25%. In some cases, the interest rate can be higher than the default rate on other credit cards. But department store cards come with discounts and regular cardholder-only deals. That’s not true with gas cards. Unless you’re willing to pay an annual fee, rewards are limited to discounts on the cost of gas. Co-branded gas cards will offer cash back on gas purchases once you spend a certain amount. But that cash back isn’t actually cold, hard dollars or a check. It’s a credit on your next statement. Story by Jennifer Waters for the Wall Street Journal.
Shrinking Household Debt is Good Sign for 2013 Economy
Consumers’ out-of-control debt loads helped spark the recession, but households are rapidly getting their balance sheets back into shape. Overall consumer borrowing could return to its long-term norms by late next year–and that could help spark a late-2013 rebound in consumer spending, economists say. Of course, it depends on consumers, who have been hurt by falling incomes and house prices, being willing to spend money once they’re in better fiscal shape. The combination of falling debt loads, a rising housing market and improving job market could boost consumer spending growth to 3.5% by late next year–double what the economy saw in this year’s second quarter. Story by Tim Mullaney for USA Today.
Mobile Devices Hit Retail Pay Dirt
Thanks to the ubiquity of smartphones, it is anyone’s guess how consumers will pay merchants in five years’ time. What is clear: As habits shift, big businesses will be at risk. For example, iPads and iPod Touches already are becoming popular alternatives to cash registers and credit card swipe machines. Take Nordstrom. Over time, the large retailer says it plans to go “completely mobile” in its stores. It is outfitting employees with iPod Touches or similar devices equipped to take credit cards. With more walking cash registers, the traditional kind provided by, say, Fujitsu, may be threatened. The same goes for regular credit card swipe terminals from the likes of VeriFone Systems. Nordstrom will benefit by reclaiming floor space devoted to registers while cutting down on lines. It is hard to say exactly what the payments landscape is going to look like, but smart merchants can be the winners. At last, there is the prospect of real competition to boost efficiency, and keep costs down. Story by Rolfe Winkler for the Wall Street Journal.
Bank of America Ramps Up Job Cuts
Bank of America is accelerating a broad cost-cutting plan and has set a target of shedding 16,000 jobs by year’s end–cuts that would see the company relinquish its title as U.S. banking’s largest employer. The reductions for the final six months of the year are part of a larger effort to retool Bank of America into a leaner and more focused enterprise. The plan is designed to make the company take less risk, generate more revenue out of existing customers and use an investment banking operation inherited from Merrill Lynch to become a major deal maker around the world. On Main Street, the refocused company will have fewer branches and a smaller mortgage operation. Story by Dan Fitzpatrick for the Wall Street Journal.
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 14.32 percent, slightly less than the 14.34 percent last week. Six months ago, the average was 14.30 percent. One year ago, the average was 14.11 percent.