Weekly Credit Card Update June 24
LOW-INCOME PREPAID USERS FACE HIGHER FEES
Millions of poor Americans who use prepaid debit cards could soon face higher fees. Under a rule to take effect in July, companies that issue debit cards must reduce the fees they charge retailers. To recoup their lost revenue, banks that offer the cards are raising fees for people who use them. Unlike banks, these companies can’t replace lost revenue by selling investment advice or adding checking fees. One of them, Green Dot Corp., has said a drop in interchange rates will likely cause it to raise fees.
Story by Daniel Wagner for the Associated Press
MERCHANTS SHRED COSTS OF PAYMENT BY PLASTIC
Merchants are racing to lower their costs when customers pay with plastic. While a new federal law will shrink debit-card fees charged to merchants starting in July, some are cracking down on how much cash customers can get back at the counter. Drugstore chain Walgreen Co. recently cut to $20 from $40 the amount of cash that customers can get back when making a debit-card purchase at some stores. Other stores are setting minimum purchase amounts for credit-card transactions. And some restaurants, dentists and other small-business owners are offering discounts to customers who pay in cash. Interchange fees typically are the biggest expense for merchants after labor. That is especially true at supermarkets and drugstores, which must pay the fees on purchases and cash-back transactions for customers who don’t want to go to the bank.
Story by Robin Sidel for the Wall Street Journal
HOW TO BUY A STOLEN CREDIT CARD
Inside the shop, different credit cards sell for different prices–platinum cards are $35; corporate cards, $45. It’s more expensive for cards with higher credit limits. So you pick and choose a basket of numbers. Criminals usually buy these things in bulk, in case the credit cards get canceled. But a few of them should work. Once the online deal is done, you get a list of credit card numbers. To turn the numbers into a piece of plastic you can actually use, you need some equipment. The machine’s called an MSR-206. You hook it up to your computer, and swipe your plastic card through it. It encodes the credit card information onto the magnetic strip–like burning a playlist onto a CD. Next you run the white plastic card through another machine to get the raised lettering and the holograms that make it look legit. Then you hit the malls and go shopping.
Story by Zoe Chace for NPR
NEW STUDY REVEALS MANY AMERICANS MANAGE MONEY POORLY
A new study by the National Bureau of Economic Research shows many Americans lack the skills and knowledge to make good financial decisions for themselves. The study shows that many households don’t plan for predictable events like retirement or for unpredictable events like emergencies. They poorly manage debt and are stung by higher interest payments and fees. Some don’t even know the interest rate they pay on their credit cards or mortgage. Poor planning and financial mistakes make a family even more vulnerable to the shocks of a turbulent economy. According to the study, many Americans take financial actions and make mistakes that lead to higher interest rates. They overdraw on checking accounts, make a late payment on credit cards, or exceed their credit limit.
FED SETS VOTE ON DEBIT-CARD FEE CURBS
The Federal Reserve next week is scheduled to vote on its final plan to regulate debit-card processing fees, giving banks and credit unions their first look at new fee curbs set to take effect next month. The public meeting is slated for the afternoon of June 29. As directed by the Dodd-Frank financial overhaul, the Fed will issue final rules that would lower debit-card “swipe fees,” also known as interchange fees, that banks charge retailers every time a consumer uses a card to make a purchase. The Fed, swamped with thousands of comments from stakeholders, missed its April 21 deadline for issuing the new rules.
Story by Maya-Jackson Randall for The Wall Street Journal
UCLA STUDENTS FACE NEW CREDIT CARD FEES FOR TUITION, OTHER PAYMENTS</strong>
The financial stress is ratcheting up a bit for UCLA students who use credit cards to pay campus bills. Starting August 1, the university will charge a 2.75% fee if students use the cards to pay for tuition, housing, parking or other fees. UCLA administrators say it has been costing the school about $6.5 million a year to absorb processing fees in the credit card transactions and that it can no longer afford those because of reduced state funding for UC.
Story by Larry Gordon for the Los Angeles Times
CAPITAL ONE TO BUY ING
Capital One Bank announced a $9 billion deal last week to acquire the online bank ING Direct USA, accelerating the McLean firm’s transformation from a credit card lender to a mainstream consumer bank. The acquisition catapults
Capital One from being the eighth-largest U.S. bank measured by deposits to the fifth–bigger than U.S. Bancorp and just below Citigroup. It also makes Capital One the country’s largest online bank, putting it at the forefront of an industry evolution that targets younger customers. This is the latest aggressive move by Capital One to expand beyond the credit card business.
Story by Renae Merle for the Washington Post
MORE CREDIT CARD DEBT MIGHT BE GOOD FOR THE ECONOMY
No one wants Americans to return to their charge-now, pay-later ways. But with 70% of the economy tied to consumer spending, a little more plastic and a little less caution might not be a bad thing. While consumers are using
their credit cards a bit more lately, they largely remain tight-fisted, according to a recent Federal Reserve report. Many economists have said consumer spending wouldn’t rebound until Americans worked off record debt run up in the mid-2000s boom. They’ve made headway, whittling their collective credit card balances to about $790 billion in April, down $180 billion since August 2008. The ratio of non-mortgage consumer debt to disposable income is at a 15-year low of 20.7%, according to IHS Global Insight. Credit card usage is restrained in part because consumer spending generally has turned up slowly. Retail sales fell 0.2% in May, the government said this week. Falling home prices and high gas prices have offset a stock market rally and moderate job gains.