Weekly Credit Card Update July 23
BANK OF AMERICA ADDS FEE FOR PAPER STATEMENTS
Bank of America Corp. is charging some customers to receive their monthly statement in the mail, the industry’s most aggressive move yet to encourage paperless banking. For now, the $8.95 monthly fee applies to just one type of account, and only in Georgia. With overdraft fees and interchange from debit cards under fire, financial companies are eager to find new sources of recurring revenue. While some banks might be reluctant to impose a fee for such a basic service, observers say that Bank of America is setting an important precedent and that other financial companies are likely to follow its example. The monthly $8.95 fee is waived for people who agree to receive their statements only online and who do not visit a teller for any transactions that can be handled by an automated teller machine or online, such as balance inquiries and deposits. The bank is only attaching a fee to statements for a new account type.
Story by Daniel Wolfe for American Banker
CREDIT CARD DEFAULTS, LATE PAYMENTS DIP IN JUNE
Consumers are getting a handle on their credit card payments, data on defaults and late payments shows. Five of the top six U.S. credit card issuers reported declines in June charge-off rates, the unpaid balances they gave up on collecting. Only Citibank, the nation’s second largest issuer with roughly 90 million cards in circulation, said writedowns and late payments increased last month. The biggest improvement was reported by Chase.
TIPS FOR CONSUMERS WITH LOW CREDIT SCORES
According to a recent FICO study, over one-fourth (25.5%) of Americans have poor credit. Nearly 43.4 million people now have a credit score of 599 or below. When you go to the grocery store or a ballgame, look around–one in four people around you have serious financial problems. Here is a history of credit card lending and government rulings that helps explain how how we got here, as well as tips for improving credit scores.
SIGNS OF RISKY LENDING EMERGE
Even as lenders struggle to pull themselves out of the credit crisis, signs of a new and potentially dangerous infatuation with risky borrowers are emerging. From credit cards to auto loans to mortgages, the hunger for new business as the crisis ebbs is causing some financial institutions to weaken lending standards and woo borrowers who might not be able to pay.
Credit card issuers mailed 84.8 million offers of plastic to U.S. subprime borrowers in the first six months of this year, up from 43.7 million a year earlier, estimates research firm Synovate. Companies are willing to take more chances because they need earnings growth. Fewer borrowers are falling behind on payments. Some lenders said they are willing to stretch because borrowers who take on credit in the early stages of an economic recovery often are less risky and thus more profitable than those who borrow later.
Story by Ruth Simon and Jessica Silver-Greenberg
for the Wall Street Journal.
BANKS EYE HIGHER FEES TO BOOST DECLINING REVENUE
Big banks facing big drops in revenue are looking to Main Street to make up the difference. Checking accounts, bank statements, even popping into your local bank branch could carry a hefty cost as the nation’s mega-banks scramble to offset expected damage from the sweeping financial overhaul. The uncertain future has overshadowed otherwise strong second-quarter earnings at JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. Bank of America is also considering raising minimum balances on some accounts and charging customers who fall below it. But banks won’t have free rein to raise fees on whatever they choose. The financial overhaul calls for the creation of a new Bureau of Consumer Financial Protection. The agency will have vast powers to enforce regulations covering mortgages, credit cards and other financial products to ensure customers are getting a fair deal.
Story by Stephen Bernard for the AP
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 this week increased to 13.68%, up from 13.62% last week. Six months ago, the average was 13.36%. One year ago, the average was 12.14%.
OBAMA SIGNS LEGISLATION OVERHAULING FINANCIAL RULES
President Obama signed into law on Wednesday a sweeping expansion of federal financial regulation, marking another major legislative victory before the midterm elections in November, which could recast the Congressional landscape. Mr. Obama took pains to try to show how the complex legislation, with is dense pages on derivatives practices, will protect ordinary Americans. “If you’ve ever applied for a credit card, a student loan, or a mortgage, you know the feeling of signing your name to pages of barely understandable fine print,” Mr. Obama said. “But what often happens as a result, is that many Americans are caught by hidden fees and penalties, or saddled with loans they can’t afford.” And it creates a powerful regulator, appointed by the president, to protect consumers of financial products, which will be housed in the Federal Reserve. The first visible result may come in about two years, the deadline for the consumer regulator to create a simplified disclosure form for mortgage loans.
Story by Helene Cooper for The New York Times