LowCards Weekly Credit Card Update January 13
TACKLE HOLIDAY DEBT NOW, BEFORE YOU FIND YOU CAN’T KEEP UP
Here they come–the post-holiday credit card bills. They’re a potent reminder of the cost of the holiday season. In just the one week before Christmas, it’s estimated that Americans spent $44 billion. How will you deal with those bills that start arriving in your mailbox this week? Don’t just set them aside and let them pile up, hoping to keep the holiday glow alive. Late fees are very costly, and will result in even more interest charges. Open the bills, take a close look–and add up what you owe. Here are three tips for dealing with your credit card bills promptly–even if you can’t pay the full balance.
Story by Terry Savage for Chicago SunTimes
CREDIT CARD ISSUERS RAMP UP COSTLY ADD-ON SERVICES
Credit card companies have ramped up their marketing of credit insurance, credit monitoring, identity theft protection services and other add-on products. The new emphasis on these add-on services reflects that credit card companies are searching for ways to squeeze more profit from their businesses. They’re challenged by new regulations that tightened restrictions on fees and interest rates in recent years. Likewise, ID theft insurance often comes with a host of restrictions. Policyholders can often only file claims on one ID theft incident per year. There is also frequently a cap on the amount of coverage, which could in some cases be less than the actual losses. Consumers should also pause before purchasing ID theft protection services, which has exploded in recent years. In August, Javelin forecast that about 25 million people would spend roughly $3.5 billion on such services in 2011.
Story by Eileen AJ Connelly for the Associated Press
CREDIT CARD DEBT INCREASES SIGNIFICANTLY
Americans are borrowing and charging much more, according to the latest Federal Reserve G19 report released this week. Consumers increased their overall borrowing by $20.4 billion in November which represents the largest increase in ten years. Many analysts believe this is a sign that Americans are feeling better about the economy. However, there could also be some red flags in this latest report. Revolving credit, the majority of which is credit card debt, increased at an annual rate of 8 1/2 percent and grew for the third straight month. The $5.6 billion jump represents the largest gain since March 2008. With the strong holiday sales, we will likely see another increase in December during the peak of the shopping season. While this increase may be good news for retailers, it also means that consumers will soon be getting credit card bills with much higher balances. Consumers can’t get lured into running up more credit card debt if they can’t afford to quickly pay it off. Increasing credit card debt is not a trend to be carried over into the new year.
TV ADVISER ON MONEY OFFERS CARD
For more than a decade, Suze Orman has exhorted her viewers on CNBC to spend less than they earn, flashed her blazing smile from the covers of best-selling books and endorsed the occasional auto loan provider and brokerage firm. Never before, however, has she built a financial product from scratch and urged her considerable number of fans to use it frequently. That changes with the introduction on Monday of her Approved card, which works a lot like a bank debit card but does not come with a checking account. It is a prepaid debit card, and companies that offer similar cards have drawn criticism for sky-high fees and poor disclosure. Ms. Orman seeks to broaden the debit card market by charging low fees and offering new services, including unlimited access to credit reports. She has put more than $1 million of her own money into the venture and is prepared to add more, since the product may not break even right away. But her move also raises so many questions that it is hard to even know where to start.
Story by Ron Lieber for the New York Times
FEE LIMITS MAY SPUR CASH-ONLY SALES
Consumers could see more $5 or $10 minimum charge rules–or at least polite requests–when using credit or debit cards this year, as merchants try to cope with an unintended effect of new federal limits on how much card issuers can charge them in so-called “swipe fees.” Those regulations already sparked an uproar when some banks tried to impose monthly debit card use fees on consumers to offset the revenue hit–only to retreat in the face of a withering backlash. But the fallout didn’t end there. In an odd twist that stems from the way swipe fees have been assessed, the new rule could prompt card issuers to actually raise fees on smaller purchases in order to offset lost revenue from lower fees on larger ones. And that means stores with a lot of small-ticket sales, such as coffee shops and gas stations, may force or coax consumers into paying with plain old cash for purchases under a certain amount, experts predict. Stores now can refuse to accept credit cards for those smaller purchases, and they may request that customers not use debit cards for them either.
Story by J. Scott Trubey & Arielle Kass for the Atlanta Journal Constitution
ISRAELI HACKER RESPONDS TO CREDIT CARD HACKING
An Israeli hacker has published details of hundreds of Saudi credit cards online and is threatening to post more in revenge for acts by Arab hackers. Last week a hacker, claiming to be from Saudi Arabia, published information about tens of thousands of Israeli credit cards online. It was one of the worst incidents of data theft in Israel. Experts say the attacks draw attention to the potential for virtual or cyber wars in the Middle East. The Israeli hacker told the newspaper he had information on an additional 300,000 working Saudi credit card numbers. “If they publish one more little detail on Israel, we will attack in full force and publish all of the credit card details,” he said. The latest attacks have underscored the hostile relationship between Israel and Saudi Arabia. They have also shown the potential for politically motivated cyber attacks to escalate in the region with Arab and Israeli hackers warning of possible future action.
Story by Yolande Knell for the BBC
STORE DEBIT CARDS ARE ON THE RISE
A store credit card isn’t the only way to get exclusive perks. Although not widely publicized, two major retailers offer store-branded debit cards that draw directly from customers’ checking accounts. The cards from Nordstrom and Target are still a rarity among retailers and haven’t yet hit the radars of most shoppers. But they also reflect the growing preference for debit cards that consumers have shown in recent years. At a time when consumers are searching for ways to keep debt in check, store debit cards could soon find a wider audience. A Nordstrom spokesman said there’s been an uptick in demand for the company’s debit card in recent months, even though the card has been available since 2005.
Story by Sarah Skidmore for the Associated Press
HEFTY PROFIT SEEN FOR CREDIT CARD ISSUERS
Investors in coming weeks will get a closer look at a rare bright spot on a bleak financial-sector landscape: credit card companies. Higher holiday sales and increased card use are expected to help Visa and MasterCard post improved quarterly earnings, say analysts. Visa and MasterCard don’t lend to customers but make money by processing card transactions for banks and merchants–a business that has been getting more lucrative, thanks in large part to consumers’ continuing move to cards from cash and checks. Visa and MasterCard have been adjusting their businesses in response to provisions capping how much large banks can charge merchants when a consumer swipes a debit card. Visa and MasterCard set the rates but their bank partners collect the fees as revenue. The provisions, part of 2010′s Dodd-Frank law, also give merchants more control over how their transactions are processed. Visa is boosting incentive payments to retailers to convince them to continue routing transactions its way. MasterCard is trying to gain share by getting more banks to use it for debit processing.
Story by Andrew Johnson for the Wall Street Journal
CHASE STOPS SUIT AGAINST CREDIT CARD HOLDERS
JPMorgan Chase has quietly ceased filing lawsuits to collect consumer debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that as recently as nine months ago was racking up hundreds of millions of dollars in monthly judgments. Robo-signing, or the high-volume production of signed legal documents, has been a key element of the governmental and media foreclosure reviews. It’s not clear why JPMorgan is withdrawing suits against credit card users. The banking giant won’t say. But the move follows several legal rulings in state courts that cast doubt on the validity of banks’ credit card claims. And in a federal whistle-blower complaint filed last year, a former vice president at JPMorgan, who worked on sales of overdue credit card loans, alleged that bank employees robo-signed paperwork used to seek legal judgments against card users.
Story by Alain Sherter for CBS MoneyWatch
PARK CITY EATERY BALKS AT CREDIT CARD FEES IN RARE COURT FIGHT
Stephen and Cissy McComb say they managed their Italian eatery in Park City, Utah, for more than two decades without running afoul of security rules of Visa and MasterCard–until they were accused of mishandling data and opening the door to $1.26 million in fraud. The McCombs are now in a legal fight with the bank that processed their credit charges and, indirectly, with what they say are card networks that change rules without notice, impose unfair one-sided contracts and allow the taking of money from merchants’ accounts with no proof of fault. Their suit may be the first court challenge to penalties under the card networks’ security procedures, said one of their lawyers. It’s rare for banks and their processors to file a lawsuit against a merchant, lawyers said.
Story by Thom Reidlich for Bloomberg
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 14.04 percent, slightly higher than the 14.01% last week. Six months ago, the average was 14.11 percent. One year ago, the average was 13.87 percent.