LowCards Weekly Credit Card Update March 2
PACE OF NEW CREDIT CARD ACCOUNTS PICKS UP IN 2011
More people opened new credit card accounts last year, as the banking industry began to loosen standards it tightened during the recession. The number of new cards issued to consumers rose 14 percent in 2011 to about 42.3 million, according to data provided by TransUnion. And about a quarter of those cards–roughly 10.7 million–went to people with less-than-stellar credit histories, TransUnion said. The combination of tight competition for top-rated consumers with improvement in the economy is encouraging banks to take a closer look at lending to consumers who made a few mistakes in the past. This is the second straight quarter that subprime consumers are getting a larger slice of the credit pie than they did during the depth of the Great Recession.
Story by Eileen AJ Connelly for Reuters
BANK OF AMERICA WEIGHS FEE REVAMP
Bank of America is working on sweeping changes that would require many users of basic checking accounts to pay a monthly fee unless they agree to bank online, buy more products or maintain certain balances. The plan by the nation’s second-largest bank by assets is the latest sign of stresses in the banking industry at a time of low interest rates, slow economic growth and new rules limiting many types of service charges. The search for new sources of income is especially pressing at Bank of America, where 2011 revenue dropped by $26.2 billion, or 22%, from its 2009 level. Bank of America pilot programs in Arizona, Georgia and Massachusetts now are experimenting with charging $6 to $9 a month for an “Essentials” account. Other account options being tested in those states carry monthly charges of $9, $12, $15 and $25 but give customers opportunities to avoid the payments by maintaining minimum balances, using a credit card or taking a mortgage with Bank of America, according to a memo distributed to employees.
Story by Dan Fitzpatrick and David Enrich at the Wall Street Journal
ARE CONSUMERS FALLING INTO DEBT TRAP AGAIN?
Maybe consumers are feeling better about the economy. Or could it be that we are once again starting to rely on our credit cards a little too much. Some newly released figures make an argument for both sides of this debate. This week, the Federal Reserve Bank of New York released its latest Quarterly Report on Household Debt and Credit. It showed the number of open credit card accounts rose by 3 million to 386 million during the fourth quarter of 2011. Credit account inquiries within six months, an indicator of consumer credit demand, increased 2.7 percent for the third quarter in a row. The report also found that credit card limits rose by $98 billion or 3.6 percent in the fourth quarter of 2011, resuming the trend of increases observed in the first half of the year. This may indicate that banks are willing to take more of a financial risk with their cardholders.
THREE BIG PLASTIC ISSUERS TAKE STEP TOWARD MOBILE WALLETS
The prospects for mobile commerce got a boost Monday when three credit card issuers said they will let their customers use a mobile-payments service being developed by several wireless carriers as part of a trial set to begin this summer. Mobile-payments services are still in their early stages as banks, payment processors, wireless carriers and other technology companies work out the technical and financial kinks. J.P. Morgan Chase, Capital One and Barclays will make available a service called Isis, which will allow consumers to pay for goods at stores by tapping their mobile phones against a merchant’s payment terminal rather than swiping a plastic card. The phones must be equipped with a technology called near-field communication, or NFC, and a merchant must also have special readers
to handle the technology. Isis is a joint venture of AT&T Inc., T-Mobile USA and Verizon Wireless. The technology is one of several services aimed at converting consumers’ smartphones into payment devices, an effort that analysts say could help banks and merchants find new ways to push promotions to customers but has been slow to catch on because of questions about costs and security.
Story by Andrew Johnson for the Wall Street Journal
MORE DECIDE TO CHARGE A TAXI RIDE
More than half the total fare revenue to New York City taxis was paid with the swipe of a charge card last month, more evidence of a marked shift in the way New Yorkers pay for an iconic amenity, the yellow cab. Fifty-five percent of the gross revenue to taxis in January came via credit card, and cards were used in 47 percent of all taxi trips, according to the Taxi and Limousine Commission. Compare that to 2009, shortly after card readers became standard in taxi cabs when about one-third of trips were paid for by charge cards. Total revenue to the industry has recently averaged more than $6.3 million per day–up significantly from 2008. The ability to use credit cards has helped bring new customers into taxis, including businesspeople who prefer the ability to itemize credit card expenditures instead of using cash. The Taxi and Limousine Commission will vote on a proposed pilot program that would outfit 50 cabs with tablet computers operated by Square, the Silicon Valley start-up that provides low-cost credit card processing for individuals and small businesses.
Story by Ted Mann for the Wall Street Journal
WHY IT’S SO HARD TO TRANSFER MONEY PERSON-TO-PERSON
Nearly two-thirds of Americans give money both for birthday and holiday presents at least once each year, according to a 2010 study by Aite Group, a research and advisory firm. Another quarter handed off financial support, often to a relative. All told, this adds up to 11 billion transactions and $865 billion annually. You can see why banks want a piece of that action. And sure enough, an all-out war is unfolding behind the scenes to make sure you will still use your bank and not some app or other third-party service from the likes of Google or FaceBook or Apple to make those payments five or 10 years from now. The banks would also like you to pay for it, each and every time, as recipients of money now do with the Square device. But what would actually be worth paying for? One thing that might get consumers on board faster is if the money moved instantly from one bank account to another at a different bank. But because these payments move along the same electronic railroad tracks that checks do, it can still take a couple of days. That is profoundly irritating to people who think they’re handing money across the table with a cellphone only to find that the money is actually caught up in a decades-old intrabank system that desperately needs updating.
Story by Ron Lieber for the New York Times
HOW TO BEAT BLACKOUT DATES AND SAVE A BUNDLE
In recent years, blackout dates have been a classic “good news-bad news” for airline frequent flier members. While many airlines and branded credit cards have boasted of the elimination of blackouts and this news has been widely reported, experts say securing award seats is no easier during crunch periods such as the holidays. In fact, in many cases it’s harder, as= airlines and other travel suppliers still employ sophisticated capacity-control tools to limit availability, even when they don’t declare official blackout dates. In some cases, airline blackout dates remain very much in effect, or they require additional mileage on certain days. US Airways still lists 15 days in 2012 when they apply throughout North America. But that list is supplemented by much more extensive lists for
individual cities throughout the U.S., as well as Hawaii and international destinations. Even when blackouts have been eliminated, it’s still necessary to read the fine print. “No blackout dates” doesn’t automatically mean seats or accommodations will be available; you still need to find availability. During busy seasons, the general rule is, the earlier you book, the better.
Story by Bill McGee for USA Today
AMERICAN EXPRESS FACES ENFORCEMENT ACTION OVER LATE FEES
American Express is facing an enforcement action by the Federal Deposit Insurance Corp. and possibly the Consumer Financial Protection Bureau over late fees the company charged some charge-card customers, American Express said Friday in a regulatory filing. The customers affected by the incorrect fees used charge cards that also allowed them to carry balances. American Express was applying the late-fee structure for “pay-in-full” products to charge cards that include the lending feature, a spokesman for the company said Friday. The late fees were being applied to the balances that customers had scheduled to pay in full at the end of each month, the spokesman said. The company changed the policy in December per feedback from regulators and now applies rules pertaining to revolving credit cards to those hybrid cards, the spokesman said. He declined to say how many customers were affected.
Story by Andrew Johnson 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 14.25 percent, slightly lower than the 14.27 percent last week. Six months ago, the average was 14.09 percent. One year ago, the average was 14.24 percent.