LowCards Weekly Credit Card Update April 27
Millennials Struggle with Financial Literacy
Studies show that a majority of young people in the United States have poor financial literacy, a trend that has been consistent over the past decade and shows few signs of improving. Today’s twentysomethings hold an average debt of about $45,000, which includes everything from cars to credit cards to student loans to mortgages. How bad is the problem? Fewer than half of states make high school students take an economics class, and just 13 require a personal finance class, according to a 2011 survey by the Council for Economic Education. In those 13 states, though, the payoff is clear: students who had taken such courses were more likely to go on to save money and pay off a credit card bill in full each month, and less likely to be compulsive buyers, max out credit cards and make late payments.
Story by Hadley Malcolm for USA Today.
Nine U.S. Banks Said to be Examined on Overdraft Fees
Two years after regulators gave Americans more power to manage overdrafts of their checking accounts, the Consumer Financial Protection Bureau is reviewing bank practices to determine if the crackdown went far enough. The agency is scrutinizing nine banks including JPMorgan Chase, Wells Fargo and Bank of America, said four people briefed on the examination. The inquiry focuses on how financial institutions persuade customers to enroll in what they call overdraft protection programs. Examiners are looking at online and mailed marketing material as well as scripts used by the banks’ customer service representatives to determine whether they could be confusing to consumers, said the people. While tighter rules could help U.S. consumers, they also could threaten a major revenue stream for banks already struggling to replace income pinched by new regulations. Story by Carter Dougherty and Margaret Collins for Bloomberg.
Brush Up on Credit, Debit Cards Before Trip
When actor Karl Malden used to warn Americans not to leave home without them, he was referring to travelers checks. Now, credit and debit cards have become the indispensible means of payment for anyone in transit. Travelers checks are past their prime. You can still buy them, but the volume of outstanding checks has dropped from a peak of $9.1 billion in 1995 to $4.2 billion today, reports the Federal Reserve. That has opened the door for the increased use of credit and debit cards by travelers. With the summer vacation season approaching, here are some relevant tips. Story by Russ Wiles for the Arizona Republic.
Don’t Let Debt Weigh Down Your Retirement
Not so long ago debt “was a four-letter word when spoken in the same breath as “retirement.” Before waltzing into their golden years, older Americans paid off their loans, then celebrated by burning the mortgage. How things have changed! Now a third of folks 65 and older have a mortgage vs. 20% two decades ago, according to recent Census data. Median balance: $56,000. Meanwhile, seniors 65 and up carry an average $10,235 on credit cards, think tank Demos reports. Story by Karen Cheney for Money Magazine.
The Importance of Financial Literacy
The less you know about credit cards, the more you will pay, especially if you are a woman. A study from the FINRA Investor Education Foundation showed that women with low levels of financial literacy were more likely to take part in costly credit card behaviors than men with a low level of financial literacy. However, there were no differences in behavior between men and women with high financial literacy. The findings imply that increasing financial literacy can improve credit card management as well as reduce or possibly eliminate gender-based differences in credit card behavior. According to the survey, women were six percentage points more likely than a man to be charged a late fee, five percentage points more likely to carry a balance, and four points more likely to pay the minimum payment on their cards. Story by LowCards.com.
New Jersey Church Burns Credit Cards to Protest Predatory Lending Practices
Sometimes, more than incense and candles are burned at Church. Last Sunday, members of the First Baptist Church of Lincoln Gardens in New Jersey gathered to burn mailed credit card offers following church services in an act of protest against predatory lending, myCentralJersey.com reports. The group was led by Rev. DeForest B. Soaries Jr., an outspoken activist against aggressive lending practices and a proponent of debt-free living. Now Soaries is concerned credit card companies may be taking advantage of low-income Americans, whose poor credit can result in higher interest rates and stiff late payment fees. Recent data supports his claim: credit card companies issued 1.1 million new cards to borrowers with poor credit in December, an increase of 12.3 percent from the same month last year. Story by Harry Bradford for Huffington Post.
Consumer Bureau Probes Arbitration Clause in Financial Products
The government’s new consumer watchdog is launching an inquiry into the use of arbitration clauses in financial contracts, which keep disputes over credit cards and other products out of the court system. Consumer advocates long have complained that so-called “pre-dispute arbitration clauses” gave too much of an advantage to financial firms over average Americans, who often don’t realize they’ve signed away their right to sue. But companies said third-party arbitration is fair and saves money because it’s faster and less-expensive than going to court. The Supreme Court has backed the use of arbitration clauses in contracts over a consumers’ right to go to court.
Story by Jim Puzzanghera for the Los Angeles Times.
Chasing Fees, Banks Court Low-Income Customers
An increasing number of the nation’s large banks–U.S. Bank, RegionsFinancial and Wells Fargo among them–are aggressively courting low-income customers with alternative products that can carry high fees. They are rapidly expanding these offerings partly because the products were largely untouched by recent financial regulations, and also to recoup the billions in lost income from recent limits on debit and credit card fees. Banks say that they are offering a valuable service for customers who might not otherwise have access to traditional banking and that they can offer these products at competitive prices. The Consumer Financial Protection Bureau, a new federal agency, said it was examining whether banks ran afoul of consumer protection laws in the marketing of these products.Story by Jessica Silver-Greenberg and Ben Protess for the New York Times.
Consumers Need More Protection, Not Less
The new Consumer Financial Protection Bureau is supposed to shield Americans from abusive banking and lending practices. And in its first nine months, it has been doing a good job. But consumer advocates are rightly alarmed that the bureau might now revoke a Federal Reserve rule that limited the fees credit card issuers can charge new customers. The Consumer Financial Protection Bureau argued for the rule in district court. But it now seems ready to give in. Instead of appealing, the bureau has proposed a rule that would no longer limit charges levied prior to the opening of the credit card account. If the proposed rule stands, countless low-income Americans could be harmed. It would also send a message of weakness to the credit card industry and could open the door to a new round of abuses. Story in 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 14.27 percent, slightly higher than last week’s average of 14.21 percent. Six months ago, the average was 14.16 percent. One year ago, the average was 14.15 percent. Story