LowCards Weekly Credit Card Update February 24
FINANCIAL STRESS STILL PLAGUES AMERICAN FAMILIES
Despite a slowly improving job market, financial distress still plagues American families, according to the results of the latest Consumer Distress Index. The index has shown alarming signs of Americans
in crisis for 13 consecutive quarters, or 39 months. Measured by non-profit credit counseling agency CredAbility, the index takes into account five indicators of financial well-being including housing
prices, employment rates, credit, budgeting and net worth. In this latest index, falling net worth and shrinking budgets are what kept the average American household in distress.
Story by Emily Cohn for the Huffington Post
WHAT FINANCIAL REFORM IS COSTING BANKS AND CUSTOMERS
Three months after banks scrapped plans for debit card fees, it’s becoming clearer how they intend to recoup money lost in the Dodd-Frank financial reform law. Instead of one new fee, prepare to be sold more products, offered new service packages, lose debit rewards and face more fees in general. Banks’ fourth-quarter earnings provided the first definitive look at what they lost after a cap took effect on the fees merchants pay banks when you use your debit card. Combined, Bank of America and Wells Fargo reported losing nearly $800 million in lost swipe fee revenue in the fourth quarter. Regional banks felt a deep impact as well. Across the industry, banks were on pace to lose the $6 billion that had been predicted.
Story by Andrew Dunn for McClatchy newspapers
WATCHDOG GROUP TARGETS OVERDRAFT CHARGES
Bank overdraft fees are the latest target of a new U.S. financial watchdog, which said Wednesday it would demand data from the biggest financial institutions and look at ways to make the fees on checking account statements easier to understand. The overdraft fee campaign of the Consumer Financial Protection Bureau could eventually help consumers avoid unexpected charges. It comes at a time banks are planning to increase checking account fees to make up for the cost of new federal regulations. The CFPB, created by the 2010 Dodd-Frank financial overhaul, last week said it would begin regulating credit bureaus and debt collectors. A 2008 study from the Federal Deposit Insurance Corp. found 9% of checking account customers bear about 84% of overdraft fees. The FDIC also found that consumers who overdrew their accounts 20 or more times a year paid an average of $1,610 in overdraft fees annually.
Story by Maya Jackson Randall for the Wall Street Journal
WHAT HAPPENS WITH YOUR PERSONAL SHOPPING DATA?
Think twice about what you buy with a credit card because your personal shopping data is collected by Visa, MasterCard, banks, credit card issuers, and smart wallets, and then sold to advertisers and marketers. Like it or not, advertisers and businesses want to know about your spending habits so they can target you to buy their products and services. Credit card networks and issuers have enormous databases of purchase and shopping data which they aggregate, package and sell. Every purchase you make says something about you. This data is collected and you are grouped with others who have similar interests and spending patterns. Businesses then deliver ads aimed specifically to your group. Your name, social security number and bank account are never disclosed to the business or merchant. Customers are represented by numeric codes so individuals remain anonymous.
CREDIT SCORE RATERS MAY FACE NEW D.C. OVERSIGHT
The new U.S. Consumer Financial Protection Bureau released a proposal to regulate about 200 debt collectors and companies that produce credit reports as part of an effort to extend its oversight beyond the banking industry. The agency is charged by the 2010 Dodd-Frank financial oversight law with overseeing consumer financial products, such as credit cards and mortgages offered by banks, as well as some products offered outside the industry, including residential mortgages and student loans. It also has the authority to extend its oversight to companies that are “larger participants” in consumer financial markets. Debt collectors and credit reporting agencies are the first industries to be targeted for supervision under this power. CFPB Director Richard Cordray said these industries were picked, in part, because of the increased role they are playing in consumers’ lives following the economic downturn triggered by the 2007-2009 financial crisis.
Story by Dave Clarke for Reuters
CREDIT CARD DISCLOSURES: EFFECTIVE OR NOT?
Do credit card disclosures influence consumers’ financial behavior? And if so, do they influence it for the better or the worse? Both, a new study finds. The results of the experiment were mixed. Given the disclosure, more consumers opted to pay more than the minimum, and some of them, some of the time, chose to pay the 3-year-payoff amount. But consumers who chose this option tended to be those with higher credit balances, those who paid more slowly and those with lower credit ratings. Even when paying the higher amount, they were consumers going ever more deeply into debt. The reason is that lenders revise the 3-year amount with every monthly statement. A more useful disclosure, the authors suggest, might explain the fact that the 3-year target amount is being constantly reset, with the result that consumers who pay it will always be three years away from full repayment, never closer.
Story by Alan Farnham for ABC News
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 the 14.24 percent last week. Six months ago, the average was 14.11 percent. One year ago, the average was 14.25 percent.