LowCards Weekly Credit Card Update May 18
Pace of New Credit Card Accounts Picks Up in 1Q
U.S. credit card users are getting better about making more timely payments, even as banks are increasingly issuing cards to borrowers with less-than- stellar credit. The rate of payments at least 90 days overdue dipped in the first three months of the year to 0.73 percent, credit reporting agency TransUnion said. While late payments are down, cardholders have been racking up more debt. On average, borrowers had $4,962 in credit card debt in the January-to-March period. That’s down 4.7 percent from the previous quarter, as cardholders paid off purchases charged during the holiday season. But card balances grew 6.1 percent versus the first quarter last year. The number of new cards issued to consumers last year rose by more than 20 percent versus 2010, according to TransUnion. And 24.2 percent of those cards went to people with below-prime credit scores.
Story by Alex Veiga for the Associated Press.
Battle Over Debit Card Swipe Fees Goes On
When gas prices edged above $4 a gallon earlier this spring, the Merchants Payments Coalition, a group that represents retailers, said “hidden fees” charged by banks and card processing companies added up to 10 cents to the price of gas. The Electronic Payments Coalition, which represents credit unions and community banks, countered that gas would be much less expensive if station owners passed on to their customers an estimated $1 billion in savings from lower debit-card fees. The gas spat represented yet another skirmish in the battle between the financial services and retail industry over the fees retailers pay banks and card processing networks when customers use their debit cards. In June, the Fed voted to cap the fees at 21 cents per transaction, plus 0.05% of the purchase price to cover fraud-protection costs. Story by Sandra Block and Hadley Malcolm for USA Today.
Financial Abuse of Elderly a Growing Concern
As our population ages, a disturbing trend is evolving: elder financial abuse continues to grow. The estimated annual financial loss by victims of elder financial abuse is over $2.9 billion, a 12 percent increase from the $2.6 billion estimated in 2008, according to the MetLife Study of Elder Financial Abuse. Elder financial abuse occurs when someone commits unauthorized use of an elderly person’s funds or property. This exploitation can be done by an outside scam artist through phony prizes, charities, or investment fraud. Abuse can also come from a caregiver, friend or family member that steals cash or household goods, engages in identity theft, or misuses checks, credit cards or other financial accounts. Story by Lynn Oldshue of LowCards.com.
American Express Targets Small Businesses
American Express won’t charge small businesses to use a service for creating discount offers that are delivered to Amex cardholders via a new smartphone feature and other platforms as it looks to expand merchant acceptance of its high-end cards. Small merchants represent the last mile for credit-card companies, which want as many retailers as possible to accept their plastic to increase transaction volume. American Express enjoys mass acceptance among major merchants such as Best Buy, Wal-Mart Stores and Target, but has been less present among small businesses, which often scoff at the fees they must pay each time a customer swipes a card. In addition to having offers delivered to cardholders’ mobile phones, all merchants who use American Express’ Go Social platform can have deals presented via social-networking services Foursquare and FaceBook, which have partnerships with the credit-card lender. Merchants must accept its cards to use the service. Story by Andrew Johnson for the Wall Street Journal.
Using Credit Card May Save on Car Rental Costs
If you plan on renting a car during an upcoming summer vacation, using a credit card to pay for it may save you money and provide some increased protection. When you rent a car, the rental agencies will try to sell a collision damage waiver, commonly referred to as a CDW. This is the insurance that provides coverage for damage to the rented vehicle. This can cost about $15 per day. Depending on your policy, your personal auto insurance may cover any damage to the rental car. In addition, your credit card issuer may offer CDW coverage, but you must pay for the rental car in full with your credit card for this coverage to be valid. You must also decline the coverage from the rental car company. Story by Lynn Oldshue for LowCards.com.
Stay-at-Home Mom Fights New Credit Card Rule
After nearly five years managing her family’s finances, Holly McCall, a 34-year old stay-at-home mother of two, never thought she would have trouble getting a credit card. She makes the majority of family purchases, has an excellent credit score and has been approved for several cards in the past. But when McCall applied for a Target card last fall, she was denied. She blames that denial on a recent Card Act rule. The law was passed in 2009 to protect consumers from unfair and deceptive credit card practices. But some stay-at-home parents argue that a Card Act rule that took effect last October has made it harder for them to get approved for credit cards. As a result, stay-at-home parents who rely mainly on their spouse’s income have a harder time getting approved for credit cards on their own. Outraged by the new requirements, McCall created an online petition at Change.org a couple weeks ago and has already received more than 30,000 signatures–many of which are from other stay-at-home mothers and fathers. Story by Blake Ellis for CNN Money.
Best Airlines for Redeeming Miles
Ready to redeem your frequent-flier miles and reward points for a plane ticket? You’ll probably get a seat on Southwest, but good luck with Delta, at least at the basic redemption level. Southwest Airlines has the best availability of award seats among U.S. airlines on travel dates this year between April and October, according to an annual survey by IdeaWorks Co. The worst among U.S. airlines: Delta Air Lines and US Airways. Those two had no seats available at the lowest mileage level on about two out of every three inquires, or worse. Carriers with programs based on points tie rewards to dollars spent rather than miles traveled. Higher fares earn more points–so coveted business travelers are well rewarded. And travelers can find seats when fares go higher without blackout dates or capacity controls–the price in points goes up proportionally with the price in dollars. Conversely, when airline programs award miles based on the distance traveled, higher fares often don’t get higher rewards. And many flights don’t have seats available at standard mileage levels, such as 25,000 miles for a domestic round-trip, which leaves many consumers frustrated. Story by Scott McCartney for the Wall Street Journal.
Recession Added Debt, Drained Families’ Savings
The economy may be improving but many American families are still weighed down by debt and without a safety net. One out of five families owes more on credit cards, medical bills, student loans and other unsecured debt than they have in savings, according to a new University of Michigan report. And the number of families surveyed at the end of 2011 that have no savings at all increased to 23.4%, compared with 18.5% in 2009. At a time many Americans are trying to claw their way out of debt, they have no emergency fund and little or no retirement savings. Sixty percent of workers say that the value of their savings and investments is less than $25,000. And retirement confidence is at historically low levels. Not everyone is under dire financial straits. Nearly half of families say they have no debt at all from credit cards and other unsecured loans, the same percentage as in 2009, the report says. Story by Christine Dugas for USA Today.
Stagnant Wages Limit Consumer Spending
You can’t get blood from a stone–unless the stone has a credit card. Consumers managed a soft 0.1% gain in April retail sales, which suggests consumer spending is contributing only modestly to second-quarter economic growth. The weakness in real pay may explain why consumers are pulling out their credit cards again after years of deleveraging. According to Fed data, revolving debt that includes credit cards jumped in March. What is unclear is whether consumers borrowed because they were desperate to make ends meet, or because they feel confident about having the money when the bill arrives. One sign will be if credit use falls in April, suggesting consumers reacted to the temporary jump in gasoline prices. Story by Kathleen Madigan for the Wall Street Journal.
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 14.26 percent, identical to last week. Six months ago, the average was 14.14 percent. One year ago, the average was 13.98 percent.