Weekly Credit Card Update July 30, 2011
HACKERS SHIFT TO SMALL FIRMS
Hackers are expanding their sights beyond multinationals to include any business that stores data in electronic form. Small companies, which are making the leap to computerized systems and digital records, have now become
hackers’ main target. With limited budgets and few or no technical experts on staff, small businesses generally have weak security. Cyber criminals have taken notice. In 2010, the U.S. Secret Service and Verizon’s forensic analysis unit, which investigates attacks, responded to a combined 761 data breaches, up from 141 in 2009. Of those, 482, or 63 percent, were at companies with 100 employees or fewer. Visa estimates about 95 percent of the credit card data breaches it discovers are on its smallest business customers. While credit card companies require all businesses that accept their cards to comply with those standards, known as PCI, they have few measures to enforce them for small businesses. Bob Russo, general manager of the PCI Council, says many small businesses neglect basic security measures such as changing default passwords.
Story by Geoffrey Fowler and Ben Worthen for the Wall Street Journal
YOUR DEBT IS PROBABLY GROWING FASTER THAN THE GOVERNMENT’S
Americans criticize government leaders for running up the federal budget deficit, but do they practice what they preach? Not really. Individuals are living beyond their means at an even greater rate than the government is, based on recently released household-debt figures. U.S. household debt totaled $13.4 trillion at the end of 2010, or about 107 percent of the $12.5 trillion Americans earned in total household income last year, according to the Federal Reserve. The government’s total debt of $13.8 trillion represented about 94 percent of the $14.7 trillion in national income, or gross domestic product (GDP), last year.
Story by Randy Tucker for Cox Newspapers
HOW THE DEBT CEILING TALKS AFFECT ALL AMERICANS
Congress and President Obama have not reached a compromise on the debt ceiling, so the political drama continues. If the politicians can’t reach an agreement on the debt ceiling and budget issues, the nation could enter another “deep economic crisis” that would affect all Americans. Consequences could range from higher interest rates for all consumer loans, job furloughs, closed national parks and another blow to a fragile economy. The effects of a downgraded credit rating for the government are similar to a lower personal credit score. If the government has a lower credit score, every American will pay a higher price. Interest rates will increase for all consumer loans including college loans, auto loans, mortgages, and credit cards. This will be another tough blow that reduces income for households still trying to recover from the financial crisis of 2008. “Interest rates would skyrocket on credit cards, on mortgages and on car loans,” said President Obama on Monday.
VISA PROFIT BEATS ESTIMATES AS CREDIT CARD USE ACCELERATES
Visa Inc., the world’s biggest payments network, said fiscal third-quarter profit rose 40 percent, beating analyst estimates for the 14th straight period, as consumers boosted credit-card spending. Worldwide spending on Visa debit and credit cards, adjusted for currency fluctuations, climbed 13 percent from the same period last year to $941 billion, the company said. Spending by consumers outside their home countries surged 14 percent. Processed transactions rose 11 percent to 13 billion. U.S. credit card purchases climbed 9.8 percent to $224 billion, compared with a 5.9 percent rise in the same period last year. A rule requires card issuers to give merchants the choice of using at least two unaffiliated debit networks for transaction processing, which will prevent networks from negotiating exclusive deals with banks and threatens to erode Visa’s lead in the United States. Visa processed $1.05 trillion in U.S. debit card purchase transactions last year, more than triple MasterCard’s $333 billion, company data show. Visa handled 66 percent of 120.4 billion purchase transactions worldwide last year, making it the largest payment network, according to the Nilson Report. MasterCard was second, with 25 percent, while Shanghai-based China UnionPay Co. was third, with 4 percent.
Story by Dakin Campbell for Bloomberg Businessweek
CONSIDERING MONEY TRANSFERS IN CALCULATING CREDIT SCORES
Can data about electronic money transfers be used to help create credit scores for people who rely on them? That’s the subject of a study to be undertaken by the new Consumer Financial Protection Bureau. The new agency is also reviewing ways to provide clearer disclosure of the exchange rates and fees charged for the transfers, which can be substantial–up to 13 percent of amounts up to $200, according to a preliminary report from the agency. The question is whether money transfers, known as remittances, are in any way predictive of a consumer’s ability to repay loans. Remittance users typically rely on the transfers instead of using banks or credit cards. Right now, credit histories generally don’t contain remittance data. So people who rely on money transfers often have trouble getting credit scores, which limits their access to loans and even housing. One way to address this, the consumer bureau noted, would be to give senders the option of reporting their remittance history to a credit reporting agency to build credit. “This opt-in approach to reporting,” the report said, “might enable the company to build loyalty among certain remittance senders without alienating other senders who wished to retain their anonymity.”
Story by Ann Carrns for the New York Times
NEW SIMPLICITY CARD AIMS TO MINIMIZE ‘GOTCHAS‘
It’s a credit card that grants three wishes. But as attractive as the card’s features may sound, there are a few reasons to think twice before applying. Citigroup plans to launch a credit card that marries a trio of perks–no late fees, no penalty rate and a single interest rate for purchases, balance transfers and cash advances. The Simplicity card also doesn’t offer any rewards, which can be a deal breaker for some. Or it may turn out you won’t qualify for the card. Citi declined to specify what type of credit background is required. One of the biggest drawbacks is the card’s 16.99 percent interest rate. Customers who have the older version of the Simplicity card won’t automatically receive this new model. But cardholders can call customer service to see if they qualify for a switch.
Story by Candice Choi for the Associated Press
FINANCIAL TIPS FOR COLLEGE-BOUND STUDENTS
It is almost time for high school graduates to leave for college and take that first big step toward independence. Soon parents will discover how well they prepared their students to take care of themselves–can they wash their own clothes, cook for themselves and live on a budget? Talking with your son or daughter about money management, credit scores, and the dangers of debt should be part of these real-world discussions. Managing money and the responsible use of credit is not something that just comes with age. These skills need to be taught and they are some of the most valuable lessons we can teach our children. A few mistakes can cause real long-term damage to credit scores. If you co-signed on a credit card for your son or daughter, or have them on your account, their mistakes also become your mistakes.