Weekly Credit Card Update August 19, 2011
CREDIT CARD LATE PAYMENTS HIT 17-YEAR LOW IN SECOND QUARTER
Credit card users are so focused on keeping their accounts in good standing that they’ve driven the rate of late payments down to its lowest level in 17 years. The national credit card delinquency rate, or rate of payments 90days or more past due, fell to 0.60 percent in the second quarter, down from 0.92 percent a year ago. That’s the lowest rate since 1994, according to credit reporting agency TransUnion. Delinquencies were expected to drop, but the improvement in that April to June period was faster than forecast. And the improved payment habits came despite increased use of credit cards, reflected in a slight uptick in the amount of debt card users carried during the quarter. The average combined total debt for all major credit cards increased by $20 from the first three months of the year, to $4,699 per borrower. Even so, that amount is down more than 5 percent from the $4,951 average in the second quarter of 2010, and is 16 percent lower than the peak average debt of $5,575 in the first quarter of 2009.
Story by Eileen AJ Connelly for the Associated Press
WELLS FARGO TO TEST $3 A MONTH DEBIT FEE
Yet another of the nation’s top banks is flirting with the idea of charging a monthly fee to customers who use debit cards. Wells Fargo said Tuesday it will start charging a $3 monthly fee for debit card usage to customers in Georgia, New Mexico, Nevada and Oregon beginning Oct. 14.
Story by Blake Ellis for CNNMoney
FED SURVEY SHOWS CONSUMERS AND BANKS STILL CAUTIOUS ON CREDIT CARDS
Credit card late payments and default rates continue to drop, and the Federal Reserve has pledged to keep interest rates at historic lows. But only a small percentage of banks have eased their lending standards on credit cards. In addition, banks report just a moderate increase in consumer demand for credit cards. These are the major credit card findings of the latest Senior Loan Officer Opinion Survey on Bank Lending Practices
released by the Federal Reserve on Monday.
LOW RATES MAY DO LITTLE TO ENTICE NERVOUS CONSUMERS
The Federal Reserve’s announcement last week that it intended to keep credit cheap for at least two more years was a clear invitation to Americans: go out and borrow. But many economists say it will take more than low interest rates to persuade consumers, a crucial driver of the nation’s economy, to take on more debt. Credit card rates have actually gone up slightly in the last year. The one bright spot in lending is the number of auto loans, which is up from last year. But some economists say that confidence among car buyers is hitting new lows.
Story by Mitoko Rich and Tara Siegel Bernard for the New York Times
BANK OF AMERICA EXITING INTERNATIONAL CREDIT CARDS
Bank of America is exiting its international consumer card business, reaching a deal to sell the third unit this year and announcing plans to shed its much larger consumer credit card operations in the U.K. and Ireland. The nation’s biggest bank by assets said Monday it has reached an agreement to sell its $8.6 billion Canadian card portfolio to Toronto Dominion Bank for an undisclosed amount. Earlier this year, Bank of America reached deals to sell its Spanish card unit and a small business card unit in the U.K., and the bank said it now plans to shed other European card units because they aren’t core to Chief Executive Brian Moynihan’s plans.
Story by David Benoit for the Wall Street Journal
MIXED REPORT ON CREDIT CARDS
The nation’s top credit card companies yesterday reported mixed results in reducing the rate at which customers default on their accounts. Three of the six top card issuers reported lower default rates in July, compared with the
previous month. In terms of late payments, four of six had lower delinquency rates. Higher monthly default rates at Bank of America and Citigroup offset improvements for most other major card issuers.
Story by Mark Jewell for the Associated Press
CAPITAL ONE’S RECIPE FOR GROWTH: DO DEALS
Capital One Financial has found a way to grow despite the lingering hangover from the financial crisis. Its method: do deals. The unusual enthusiasm for its stock last week signals confidence that the young bank has found a strategy for the new banking order. The economy is recovering too slowly to allow banks to grow revenue solidly; the profitability and return on equity of U.S. banks might never return to what it was at the height of economic growth and the mortgage boom in the years before 2007. There are risks to both transactions: Customers could defect during the integration of ING Direct and take their deposits with them; ING Direct’s mortgage book could turn into a headache for Capital One, just as mortgages are causing pain at other big banks like Bank of America.
Story by Matthias Rieker for the Wall Street Journal