Weekly Credit Card Update Decemer 9
DEBIT CARD FEE CAP HAS A NASTY SIDE-EFFECT
Just two months after one of the most controversial parts of the Dodd-Frank financial overhaul law was enacted, some merchants and consumers are starting to pay the price. Many business owners who sell low-priced goods like coffee and candy bars now are paying higher rates-not lower-when their customers use debit cards for transactions that are less than roughly $10. That is because credit card companies used to give merchants discounts on debit card fees they pay on small transactions. But the Dodd-Frank Act placed an overall cap on the fees, and the banking industry has responded by eliminating the discounts. Merchants now are trying to offset their higher rates by raising prices, encouraging customers to pay in cash or dropping card payments altogether. Redbox, a unit of Coinstar Inc. that rents movies through vending machines, says it is raising prices by 20% to $1.20 a movie starting next month due to higher costs, including debit card fees.
Story by Robin Sidel for the Wall Street Journal
CREDIT CARD USE IS ON THE RISE
Purchases made with credit cards rose 8.2% in the first quarter of 2011, 9% in the second quarter and 10.6% in the third quarter, according to First Data. And a growing number of holiday shoppers are already opting for credit this year. Payments made with credit cards on Black Friday jumped 7.4% from the same day a year earlier, while debit card use only rose 3.4%. Credit card mailings have surged 85% since the beginning of 2010 to 1.3 billion credit card offers in the third quarter of 2011, according to analysis conducted by research firm Mintel Compermedia. Many of these offers come loaded with new perks. Several major issuers have eliminated charges like foreign
transaction fees and balance transfer fees, and many are offering heftier rewards. The push seems to be proving successful. Javelin Strategy & Research recently projected that online credit card use will surge 63% from 2011 to 2016, compared to a 2% increase in debit card use. Data on the projected increase in overall payment use–not just online–will be released later this month.
Story by Blake Ellis for CNN Money
CREDIT REPORT DATA GETTING MORE PERSONAL
Credit agencies are finding new ways to collect and assemble data on individual consumers. Credit reports can now reveal evictions, applications for payday loans, even if you are behind on homeowner’s association dues. Agencies analyze and sell this data to lenders, employers, insurers and renters who use these reports to make judgments about you. Taking care of what your credit report says about you should be a financial resolution for 2012.
FOR THE FAMILIES OF SOME DEBTORS, DEATH OFFERS NO RESPITE
When you die, your debts usually die with you. Surviving family members rarely have a legal obligation to pay unless they co-signed a loan, such as a mortgage or credit card. That leaves lenders in the lurch. But debt collectors have found a way to help lenders get their money anyway. Working on behalf of financial giants from Bank of America and Capital One to Discover and Citigroup, collection firms target survivors who might agree to pay at least part of what the dead person owed. Debt collectors say the survivors have a moral obligation to pay, especially in cases where they benefited from purchases rung up by someone else. ACA International, the industry’s main trade group, says that collecting payments on debts owed by the dead helps ensure that lenders will continue to extend credit at competitive interest rates to older Americans.
Story by Jessica Silver-Greenberg for the Wall Street Journal
http://online.wsj.com/article/SB1000142405297020422460457703 0043890121710 .html?KEYWORDS=%22credit+cards%22
CHASE MAKES IT EASIER FOR CONSUMERS TO OVERSPEND
Chase is notifying its Freedom MasterCard holders that their cards are being automatically switched from having credit limits to credit access lines that let users exceed limits without penalties. They’re making it easier for people to run up balances on their credit cards. In other words, they’re trying to get people to once again bury themselves in debt.
Story by David Lazarus for the Los Angeles Times
WHITE HOUSE SEEKS SIMPLER CREDIT CARD TERMS, FEES
The White House said it wants to make it easier for credit card holders to understand the interest rates and fees they are charged to avoid more financial strain on the middle class. Previewing an announcement by the new Consumer Financial Protection Bureau, Obama administration officials said simplified credit card agreements would help avoid confusion and stress for those struggling to make ends meet. The CFPB will release a prototype agreement that explains in plain and concise language the prices and features of credit cards, “separate from the legalese,” as a model for credit card companies to follow, the White House said.
Story by Laura MacInnis for Reuters
CITIGROUP TO LAY OFF 4,500 WORKERS
Facing stalling growth prospects around the globe, Citigroup’s chief executive said that the bank would lay off 4,500 workers in the coming months. Citi now has roughly 100,000 fewer employees than it did at the end of 2007, before the worst of the financial crisis. Most of the job losses will come from Citi’s back-office and investment banking operations, but nearly every part of Citi’s sprawling businesses will face cuts. While Citigroup has cranked out seven consecutive quarters of profits after it set aside less money to cover bad loans, the bank has struggled to increase its income. Revenue fell 10 percent to about $60 billion in the first nine months of this year, compared with the period a year ago.
Story by Eric Dash for the New York Times