LowCards Weekly Credit Card Update July 6
Big Banks Confront the Ghosts of Bank Transfer Day
Last fall, the Occupy movement encouraged frustrated customers to flee big banks in favor of credit unions and smaller banks. On the ground, it had mixed results. But large banks shouldn’t get cocky. The perception that they are disconnected from their audience persists. Javelin has been crunching the transfer numbers since the Occupy protests, and has good news and bad for larger banks. While people are not moving to smaller institutions in droves, there’s still palpable anger and a high risk of customer flight. Javelin says 11% of consumers told it they were thinking of switching their primary financial institution in the coming year, which would put about $675 billion in assets up for grabs. Bank of America and Citigroup are the most vulnerable, with as many as one in four customers considering switching. Javelin found that during first three months after November, the most recent data available, about 5.6 million American consumers switched banks. Story by John Adams in the American Banker.
Are New Rules Necessary for Mobile Payments
Existing laws may not fully shield consumers from fraud and other losses stemming from their use of emerging mobile-payments systems, according to federal regulators. The Federal Reserve, Consumer Financial Protection Bureau and Treasury Department are zeroing in on the technology as major financial-services players like Visa, MasterCard, J.P. Morgan Chase and a slew of tech firms like Google and eBay’s PayPal are rolling out phone-based payment services. While current laws governing the use of plastic credit and debit cards would cover consumers who lose their phones or incur fraudulent charges on their phone-based accounts, the involvement of nonbanking companies poses gaps in their ability to dispute charges and recoup losses, regulators testified Friday at a House subcommittee hearing. Existing laws, such as the Electronic Funds Transfer Act and Truth In Lending Act, limit consumers’ liability if they experience fraud on their debit and credit cards. Because some “mobile wallet” services available today allow customers to fund virtual accounts with existing cards, those rules would still apply if a user lost their phone, witnesses said. Story by Andrew R. Johnson for the Wall Street Journal.
Shady Overdraft Fees Could Cost Banks Over $1 Billion
Banks may start thinking twice before charging customers overdraft fees. Scrutiny over improper overdraft fees has increased recently. The Consumer Finance Protection Bureau has already unveiled plans to learn more about the way banks charge overdraft fees but big dollar settlements are what are likely to get banks’ attention. Today, US Bank agreed to pay $55 million to settle accusations that it improperly manipulating debit card transactions in order to generate excess overdraft fee revenues. The bank isn’t alone in settling on the matter. Story by Halah Touryalai for Forbes.
American Express to Offer Secure-Chip Cards in the U.S.
American Express said it would begin offering credit cards with secure-chip technology in the United States this year. The company, however, isn’t releasing details yet of when or how it plans to provide the cards to customers. American Express said last week that it was joining the other major card companies in requiring merchants to adopt payment systems that could accept cards embedded with the new chips, known as E.M.V. chips, by October 2015. Merchants may face greater liability for card-related fraud if they don’t meet the deadline. (E.M.V. stands for Europay, MasterCard and Visa. American Express, which has long used E.M.V. cards in some overseas markets, had said last year that it didn’t see strong demand domestically. But the entire card industry is now moving toward the newer chip technology here. Story by Ann Carrns for the New York Times.
Consumer Cautions on Prepaid Cards
During the last three years, the banking industry has been hammered by bad loans, increased regulations and a recession. During this time, prepaid cards have been one of the few bright spots of revenue growth for banks and lenders. Consumers loaded approximately $57 billion onto prepaid cards in 2011, and loads are projected to reach approximately $82 billion in 2012, $117 billion in 2013, and $167 billion in 2014, according to the Mercator Advisory Group Currently, there are no
government regulations and consumer protections on prepaid cards–debit and credit card rules and regulations do not apply. But that may soon change. The Consumer Financial Protection Bureau is investigating the fees and practices of prepaid cards and seeking input on ways to enforce safety for consumers. Regulations may help, but consumers should take steps to educate and protect themselves with prepaid cards. Here are some important tips about using prepaid cards. Story by Lynn Oldshue for LowCards.com.
Overdue Bills on Credit Cards and Consumer Debt Drop to 2007 Level
The portion of consumers with payments overdue on credit cards, auto loans and other debt dropped in the first three months of the year to the lowest level since 2007, according to the American Bankers Assn. Overall, the percentage of consumer loans that were at least 30 days overdue dropped to 2.35% in the January-through-March period, down from 2.49% in the last quarter of 2012. It was the best performance since the second quarter of 2007, and put consumer delinquencies below the 15-year average of 2.4%, the group said. At the worst point during the Great Recession and its aftermath, about 3.35% of consumer loans were overdue. Consumers showed great improvement on credit card debt. The percentage of overdue credit card payments fell to 3.08% in the first quarter from 3.17%. It was the lowest level since 2001. In mid-2009, about 5% of all credit card accounts were delinquent. Story by Jim Puzzanghera for the Los Angeles Times.
Yes, People Actually Post Pictures of Their Credit Card Online
Here’s your online security tip of the day, one that actually pains me to type because of what it implies about the human intellect: Don’t take a picture of your credit card or debit card and post it on Twitter, Instagram, or any other part of the Internet you’ve somehow learned to use despite your stunning lack of basic decision-making skills. Twitter’s schadenfreude machine has recently discovered an account called “Needadebitcard,” whose sole purpose is to retweet messages in which users link to pictures of their own debit cards or credit cards. Since it was created in May, Needadebitcard has found and posted dozens of examples of Twitter users who display their credit card or debit card details in a photo, along with messages such as “So I kinda broke my debit card” with a picture of a cracked but very legible card from TD Bank. Or “Ok.so the last time I saw my credit card it was here” along with a picture of a small child with a platinum credit card from Barclays Bank in his mouth, all digits entirely visible. Story by Andy Greenberg for Forbes.
Bank of America, TD Bank, Others Agree to Simplify List of Fees
A growing number of banks and credit unions are creating short, easy-to-read summaries of their checking account fees, instead of forcing customers to wade through scores of pages of legal disclosures to find the charge for bouncing a check. Citigroup is expected to announce this month that it will join more than a half-dozen financial institutions, including JP Morgan Chase and TD Bank, that have already adopted a version of a one-page disclosure form created last year by the Pew Charitable Trusts, a nonprofit based in Philadelphia. Bank of America, the largest bank in Massachusetts, confirmed it plans to introduce a similar summary later this year. The changes come in response to complaints about rising fees and a tendency of banks to bury them in long, complex documents filled with hard-to-understand legal terms. Many customers learn of the fees, for everything from closing an account to getting a paper statement, only when they get hit with them. Story by Todd Wallack for The Boston Globe.
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 higher than the 14.30 percent last week. Six months ago, the average was 14.01 percent. One year ago, the average was 13.95 percent.
About Bill Hardekopf
Bill Hardekopf is the CEO of LowCards.com and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.