LowCards Weekly Credit Card Update March 16
BANK OF AMERICA CHIEF SEES CONSUMER SPENDING REBOUND
Bank of America CEO Brian Moynihan said he sees signs of a rebound in U.S. consumer spending that would help improve earnings at the second-biggest U.S. lender. Purchases by the bank’s credit and debit card customers increased 5 percent to 7 percent for each of the last five months, Moynihan said. The company handles $35 billion to $40 billion of such transactions a month. “The American consumer is healing,” Moynihan said. “There’s still an unemployment problem, we all have to work to solve that. But this economy is much better than it was six months ago or six months before that. It just keeps feeling better.”
Story by Hugh Son and Betty Liu for Bloomberg
WHY BANK FEES ARE HERE TO STAY
Outraged bank customers better have a lot of stamina, because the battle over new fees may only be getting started. Before the 2008 financial crisis, banks made a ton of money from proprietary trading, securitization, overdraft fees, high credit-card interest rates and many other types of activity. That made it easy to offer checking accounts that included things like free ATM withdrawals and unlimited check writing, with no rules about how much business you brought to the bank or how much time you took at the teller window. Banking is a different business today, with many once-profitable activities banned or curtailed. So it’s no surprise that banks are unbundling free checking and starting to charge for things that used to be offered gratis as part of a broader package. Instead of profits from one part of the industry subsidizing services offered in another, bank customers would basically pay for what they get. Limits on what banks can charge their most vulnerable customers would mean that less vulnerable customers pay a bit more. Banks would offer discounts to customers who make “bulk purchases,” which in banking means consolidating all of your loans, credit cards and accounts at one bank.
Story by Rick Newman for US News
CONSUMERS SHAPE UP THEIR FINANCES
Americans ramped up their borrowing late last year for the first time since the depths of the recession, as households took out loans for education, cars and holiday gifts. Household debt, including mortgages, credit cards, auto loans and student debt, rose 0.25% on an annualized basis in the fourth quarter of 2011, the Federal Reserve said. It was the first increase since the second quarter of 2008, before Lehman Brothers’ collapse and the ensuing financial panic and recession. Since then, Americans have focused on reducing their debt. That process strengthens an economy in the long run but crimps short-term growth by cutting off consumer spending–which fuels most economic activity. With the job market firming, Americans are borrowing more, the Fed data show, mostly through student loans but also auto loans and credit cards. That suggests households are in better shape than during the downturn.
Story by Neil Shah for the Wall Street Journal
AMERICAN EXPRESS INCENTIVES TO PUSH DEALS ON TWITTER
There’s a new way for American Express cardholders to earn rewards–but you have to be willing to Tweet for these savings. The giant credit card issuer announced that its customers could now sync their credit cards to their Twitter accounts, which will make them eligible for credits applied to their monthly statements. Take Whole Foods, for instance, which is currently offering a $20 statement credit if you spend $75 or more in its stores. You qualify for the offer if you include the #AmexWholeFoods hashtag in your Twitter message. You are also free to say whatever you want in your message, so you don’t have to feel like a total shill. But let’s not fool ourselves; that’s exactly what you will be, as American Express is hoping you’ll share the details of its promotion with your Twitter followers, and then they will let their followers know.
Story by By Tara Siegel Bernard for the New York Times
VISA, MASTERCARD PAYMENT VOLUME CONTINUES TO RISE IN FEBRUARY
Visa and MasterCard, the largest credit card processors, said card use continued to grow in February. Total U.S. payments volume for Visa rose 10 percent in February from a year ago. The volume of credit card payments grew 15 percent, while debit card payment volume was up 7 percent. However, adjusting for an extra day in February this year, total U.S. payments volume rose 6 percent, credit card volume was up 11 percent and debit card volume was up 4 percent.
Story by Andrew Johnson for the Wall Street Journal
WHAT CONSUMERS SHOULD KNOW ABOUT CREDIT CARD DEBT COLLECTION
Debt collection consistently ranks extremely high in any survey or study that tracks consumer complaints. Debt collection is an industry with an aggressive reputation, known to sometimes use strong and harassing tactics in an attempt to collect debt that is past due. In its 2011 report to Congress, the FTC received more than 140,000 consumer complaints regarding unfair, deceptive and abusive debt collectors. According to American Banker, the Office of the Comptroller of the Currency is currently investigating JP Morgan Chase for improper credit card collections. The publication cites current and former employees who report that Chase “took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years.” Chase employees report that the Chase card litigation involved unreliable external attorneys as well as poor office procedures. Perhaps as a result of the investigation, Chase stopped suing delinquent borrowers in 2011.
AMERICAN EXPRESS PLANS TO BUY BACK $5 BILLION IN SHARES
American Express Co. plans to buy back up to $5 billion of its own stock and boost its dividend, after the credit card company passed the Federal Reserve’s stress test. American Express plans to boost its quarterly dividend to 20 cents per share from 18 cents. The New York-based company said Tuesday the Fed had no objections to the buyback or the dividend increase.
Story by the Associated Press
15 OF 19 BIG BANKS PASS FEDS LATEST STRESS TEST
The Federal Reserve had a key take-away from the latest round of stress tests: most big banks are in good shape. On Tuesday, the central bank said that 15 of the 19 largest financial firms had enough capital to withstand a severe recession. The results, announced two days ahead of schedule, paved the way for JPMorgan Chase and other banks to bolster dividends and buy back shares. But the stress tests also underscored the uneven nature of the industry’s recovery. Firms like JPMorgan and Wells Fargo are proving resilient, as they clean up their books and the economy improves. Still others, including Citigroup and Ally Financial, remain on shaky ground, grappling with soured mortgages and other troubled businesses.
Story by Peter Eavis and J.B. Silver-Greenberg for the New York Times
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 14.29 percent, identical to last week. Six months ago, the average was 14.14 percent. One year ago, the average was 14.25 percent.