March 23rd, 2011
Wednesday Roundup: Debt & Cracking Down on Credit Card Regulations
Things are looking up for consumers when it comes to credit cards. The Federal Reserve has stepped up to clarify some of the regulations put into place with the CARD Act, USA Today reports. But what do these clarifications mean for you?
Here we outline the three specific amendments, which will go into effect on Oct. 1.
- Card issuers can assess an applicant’s ability to repay debt using individual income or salary, instead of household income.
The term “household income” has been deemed too vague. This new process will help keep banks from issuing cards to consumers who can’t pay off their debt, but it could also unintentionally target stay-at-home moms, who share income with their spouses.
- Fees charged in the first year of the account max out at 25% of the credit line, including any fees charged before an account is opened, such as application fees.
This will keep first-year fees under control, but it might also open the door for credit card issuers to begin charging higher application fees.
- Card issuers are prohibited from raising or revoking promotional interest rates, including the waiver of interest charges.
The only exception to this regulation is when an account becomes more than 60 days delinquent. Could this new clarification mean that credit card issuers become even more cautious when approving applicants?
Bottom line: Just as with any new credit card rules and regulations, be sure to understand what it means for you. These amendments don’t go into effect until the fall, but it’s important to understand them now and prepare accordingly, especially if you’ll be in the market for a new credit card soon.
Read on about the newest technology in credit cards, the best gas credit cards, the little-known baseball debt crisis, and much more!
June 16th, 2010
5 Great Changes To Your Credit Card… 5 Predictions Of The Industry’s Backlash
More changes are coming to your credit card, but at least this time, these changes won’t cost you in interest rate hikes or credit limit cuts.
The Federal Reserve announced new rules regarding credit card fees, in effect August 22nd, as the final set of changes to the CARD Act.
These reforms tighten up some loopholes on fees and aim to protect cardholders from unfair practices. Let’s take a look at the changes that will impact your plastic soon:
March 10th, 2010
Wednesday Trends in Credit Cards & Debt
Consumer credit levels have up and down results at the start of 2010. On the one hand, overall consumer credit increased 2.4% in January (as compared to a 2.2% decline in December) and showed $2.45 trillion in consumer credit outstanding, reports Credit.com. But, the good news is that revolving consumer credit has consistently decreased every month for over a year, showing that consumers are continuing to pay off their credit card debt.
Credit.com writes, “Though a drop in revolving consumer credit may be taken as a positive sign in the form of people paying off their credit card debt, it also can have a negative connotation. A drop in revolving debt outstanding could also mean that banks had to charge off of what is owed to them as customers find it hard to pay off their credit card debt.”
Stay on top of your debt and credit card news with the rest of today’s roundup favorite personal finance articles and posts.
January 20th, 2010
Wednesday Trends in Credit Cards & Debt
Reuters reports that credit card charge-offs at major credit card companies are decreasing. Three out of five U.S companies reported declines, including Bank of America, however BofA has the highest default and delinquency rates of the five companies. JPMorgan and American Express report a steady decline in charge-offs.Issuers with the highest percentages of cardholder charge-offs include Bank of America with 13.53%, Capital One with 10.14%, and Discover Financial with 8.68%.
Avoid a charge-off, which will leave a negative mark on your credit report and damage your credit score, at all costs, and keep up with credit card news and debt help with the following roundup:
Credit Card News
- Issuers may be looking beyond credit scores of credit card applicants and into more personal information. SmartMoney writes on this issue and more credit trends for 2010 and the future of plastic.
- Think the balance on your credit card is like any other kind of debt? Think again. Credit Card Guide website explains 4 reasons why credit card debt is different.
- 6 new credit card booby traps on the way reports MSNBC. Look out for more cards with annual fees and unexpected changes in your rewards program.
- The Tennesseean posts an interesting editorial suggesting that the Credit Card Act will bite those it meant to protect.
- Do you make this dangerous credit card mistake? asks Money Under 30. If you have a cash-back or rewards credit card, banks might be baiting you with incentives to make you pay more.
Debt News
- Slash your credit card debt in four simple steps, brought to you by LoveMoney, starting with reducing the cost of your debt.
- WiseBread advises goal-setting in debt to more effectively achieve your debt reduction goals.
- For more debt reduction strategies, Rapid City Journal posted some Q&A from The Credit Guy on what steps are needed to eliminate debt in 2010.
- Heard of the debt buster challenge from Lending Club? Take on a low-interest loan to ditch your debt, and Lending Club will send you a backpack of freebies!
- Is there a “good reason” to go into debt? questions Bible Money Matters. Are there certain things that you want badly enough to make you willing to take on debt?
January 6th, 2010
Wednesday Trends in Credit Cards & Debt
Every penny counts today as the value of the dollar continues to decline in the new year. The blog, “Dual Income No Kids Finances,” posted this picture of what a dollar buys to see just how much American money has depreciated in comparison to world currencies.
If you’re keen on paring down debt, consider the value of each and every dollar you save. Skipping a morning latte or a trip to the movies adds a little more fuel to your debt reduction plan . Read ahead for more debt help and credit card news updates.
Credit Card News
- Did you know you can build credit without credit cards? Blog site Eliminate the Muda explains.
- “Tip 4: Improve your credit score,” — sound familiar on this blog? Bankrate.com suggests 10 best credit card moves in 2010 to put you on the right track to great credit.
- If you are already carry a balance on your credit card, Rich Credit Debt Loan suggests the smart way to handle credit card debt.
- More consumer information about the Credit Card Act of 2009 reported by ABC News. Extra information you need to know about what moves your credit card issuer might make in the coming weeks.
- Here’s another article to prepare you for the Credit Card Act, 5 steps to dominate the new financial legislation in 2010, from blog site Foreigner’s Finances.
Debt News
Fresh from holiday spending season, the following articles and blogs focus on getting rid of holiday debt and planning debt reduction strategies for the new year:
- 5 ways to dig yourself out in 2010 reported by MSN MOney. “1) Save $500.”
- Erase holiday debt from The Wall Street Journal. “Stretching debt payments for holiday spending over a long time will negate any savings you might have gained from any seasonal sales or discounts.”
- 9 rules to get out of debt blogs DebtKid. “You must cut expenses like a butcher. Slash away. Everything non-critical must go.”
- How to waste money in 9 easy steps by 20something Finance. “#3: Pay whatever fees the bank charges you because they’re the boss.”
- Why tracking expenses is important when paying off debt writes Being Frugal. “Without tracking your expenses, it’s hard to know where you’re overspending.”
December 31st, 2009
79.9% interest rate hike?!
First Premier Bank’s, a subprime credit card issuer, latest 79.9% interest rate hike has likely set a record as the most exorbitant interest rate ever in the credit card industry.
It isn’t out of the norm for issuers to be enforcing rate hikes and new fees; it has become a normalized practice in the industry since the CARD Act was passed last May. In order to recoup projected losses anticipated in the upcoming credit card reforms, most major issuers, from Bank of America to Citibank, have used the last few months to change cardholders’ terms and conditions; interest rates have doubled to 29.95% up from the average 13-15%, credit limits have been cut without warning, as well as older accounts being closed without reason.
Why the steep hike from First Premier Bank? In an effort to comply with the CARD Act’s stipulation that card fees cannot exceed 25% of a card’s credit line, First Premier lowered its card from the usual $256 minimum in fees for the first year for a credit line of $250, to a $75 fee for a credit line of $300. As a result, the interest rate shot up from 9.9% to 79.9%. First Premier said the 79.9% APR offer is a test for new customers and may or may not affect existing customers.
This latest rate increase by First Premier Bank is not only excessive, but it may actually prove effective. First Premier Bank, as a subprime issuer, targets people with poor credit who aren’t typically approved by other credit card companies and aren’t left with many other options. In a statement to the press, First Premier noted that it needed to “price our product based on the risk associated with this market”.
Additionally, the revamped terms might also come with new credit standards. First Premier might be moving away from its historical base of consumers with less-than-perfect credit. Synovate, a research firm that tracks credit card mailings, reports that typically 91% of First Premier’s mail offers are sent to subprime households with credit scores below 700; in the third quarter, the bank sent 84% of its offers to subprime households. This decrease indicates that First Premier may be cleaning up its credit card portfolio and tightening its credit standards to target people with healthier credit; subprime borrowers have a propensity to default and pose a risk to overall profitability.
Keep up with more credit card news and updates on our Wednesday roundup!
At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!
December 30th, 2009
Wednesday Trends in Credit Cards & Debt
Do you think you could live happily on 75% less money? MSN Money poses this question as the Great Recession spills over into 2010 and challenges consumers to do more with less money. Is living a happier, more financially-fit lifestyle on your list of resolutions this year? Read ahead for debt reduction tips and credit card strategies to help you maximize your New Year’s money management habits.
Credit Card News
- Charge cards make a comeback in our credit crunched economy in the Wall Street Journal’s Tamer cards for toughter times.
- Another alternative to credit cards is gift cards, and MSNBC wants to make sure you know how to get full value for your gift card.
- Building an army of cashback credit cards is the best way to optimize your earning power as a savvy credit card user, advises Money Under 30.
- New credit card rules add accountability reports the Los Angeles Times, and explains how your credit card company will change once major industry reforms take effect in February.
- What is the 10 second credit limit increase? Bargaineering blogs on the quick credit line increase you might be eligible for, and also the benefits and drawbacks of upping your limit.
Debt News
- Wise Bread helps consumers get a grip on their debt with advice on how to obtain a clear, concise snapshot of your personal finances.
- If you are intimidated by the heights of your mountain of debt, The Chicago Tribune maps out the first steps on how to scale it.
- Looking into debt consolidation? Doughroller suggests one method of consolidating debt with P2P websites Lending Club or Prosper; it might be just the kind of debt help you need.
- Pay off debt in 2010 by increasing your debt snowball blogs Enemy Of Debt. Some motivating words to get you on your way: “Being broke is no fun. Living paycheck to paycheck is stressful, so now it is time to make the changes necessary.”
- Another post to help with your New Year’s resolution to ditch debt: Kiplinger puts you on a financial diet for 2010 with 4 ways to trim your spending. Start simple with #1: Track your spending.
December 16th, 2009
Wednesday Trends in Credit Cards & Debt
Swiping your credit card virtually anywhere will soon be possible with a dongle, a phone case that swipes credit cards. The dongle swipes the card and accompanying application which runs the transaction through your iPhone. This high-tech application will make it temptingly convenient to charge to credit anywhere and anytime. Useful gadget or just more incentive to spend? For more on the latest on credit card and debt news, check out today’s round-up:
Credit Card News
- MoneyNing asks, why give my kids a student credit card?
- Associated Press reports that more on-time credit card payments expected in 2010. Is credit management one of your New Year’s Resolutions too?
- As debit cards grow, rewards programs follow, writes SmartMoney; Credit Karma picked up early on this hot topic last week with our own review of a debit rewards program card.
- Enemy of Debt suggests paying an extra 10% towards your credit card balance each month as one of 5 simple ways to pay down your credit card bills faster.
- Is there anything you should be worried about putting on your credit card? Realm of Prosperity tells you how to hide naughty credit card purchases.
Debt News
- Check out Fox Business’ 8 ways to stay debt free during the holidays.
- Good news on the nation’s personal finances: US household wealth up, debt down reports AFP.
- “Unhook the cable,” Gather Little By Little suggests. Read save $2000 or more this year for more household tips to cut down on spending to cut out that debt.
- The benefits of leveraging debt to create multiple income streams from Rich Credit Debt Loan explains how to use “good debt” to actually help you secure your financial future.
- An Emergency Fund’s tip on credit card’s payment protection plan can help you take advantage of emergency monthly payments that your issuer may offer.
December 3rd, 2009
Bank Of America Introduces Credit Card Clarity
In a move that echoes the spirit of the CARD Act, Bank of America launched its Credit Card Clarity Commitment program, which gives BofA cardholders a one-page summary of easy-to-understand terms and conditions for its credit cards.
Bank of America, the nation’s largest credit lender, is currently mailing out its single sheet of need-to-know card information to all of its 40 million cardholders, explaining everything from balance transfers to cash advances, plus a summary of fees and clearly-stated payment information of how to keep the account in good standing. New BofA customers will also receive it starting next year.
The Credit Card Clarity Commitment program is an extension of other BofA examples of clarified and straightforward business practices. Similar proposals unveiled earlier this year are Bank of America’s clarity initiative for mortgages and the Bank of America Basic Visa, which features a one-page summary of terms and conditions as well as a fixed interest rate and flat late fee payment. This is also the first action taken by a major issuer to fulfill the “Plain Language in Plain Sight” provision of the CARD Act’s reforms, stating that issuers must disclose any and all information that would help customers make informed choices about credit use.
Of course, Bank of America’s olive branch to consumers may be less of an act of goodwill and more of a federally-mandated reform, or a last-ditch effort to appease frustrated cardholders. While this disclosure act is a good thing for BofA customers, Bank of America hasn’t been too popular with its cardholders lately. In the past few months, BofA has become notorious amongst issuers for its added annual fees, credit limit cuts, and a record number of charged-off accounts for uncollectible card loans that escalated to the highest percent charge-off rate of all major card issuers in October (source: eCreditDaily).
Other issuer-led efforts to educate consumers on credit cards and personal finance include Bank of America’s own online personal finance education site as well as a slew of personal financial management websites offered by several issuers to add more transparency to the mysterious, obscure policies of credit access and use.
“We are delivering simplicity and choice across our products and services that will help our customers better manage their finances. In the end, when our customers succeed, we will succeed,” said Brian Moynihan, BofA president of consumer, small-business banking and card services, in a statement. Clear, straightforward language and full disclosure from a credit card issuer? This may be the beginning of a better era of consumer-friendly banking.
At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!
December 2nd, 2009
Credit Scores Rise With Uptick in Retail Card Balances
Consumer credit scores are on the rise at the start of the busiest spending season of the year. Credit Karma user data from October reveals that retail credit cardholders are doing something right: while the average credit score of Credit Karma users with retail cards we follow increased 5 points to 698 in October, the average credit score of all Credit Karma users actually dropped one point to 671 in October. We saw a very slight uptick of $23 in balances on retail cards in October, possibly a sign that holiday shopping is starting early this year.
Many economists are predicting conservative holiday shopping at best, but we’re seeing some early movement in balances at upscale department stores, like Bloomingdales and Nordstrom, which experienced the largest average increase of $168 in cardholder balance in October. Retail clothing chains, including Banana Republic, J Crew, and Old Navy, had almost unnoticeable changes in average balances, increasing in October a mere $15.
Consumers pared back balances in usually popular gift electronic and jewelry categories by $48 and $20 respectively. Smaller balances in these categories may indicate that there will be less big ticket items under the Christmas tree—like a new HD TV for Dad or a diamond tennis bracelet for Mom—in favor of more modest gifts like a sweater or scarf from the gift receiver’s favorite department or retail store. Yet, it may also mean last-minute big ticket purchases are yet to come.
Key Retailers’ Credit Card Metrics
|
Average Card Balance in Oct
|
Average Credit Limit in Oct
|
Average Credit Score in Oct
|
|
|
Upscale Department
(ex. Bloomingdales, Nordstrom) |
$869.28
|
$1,748.37
|
708
|
|
Discount Department
(ex. Target, Kohls) |
$696.03
|
$1,470.40
|
688
|
|
Retail Clothing Chain
(ex. Banana Republic, J Crew) |
$340.84
|
$816.28
|
697
|
|
Electronics
(ex. Best Buy, Amazon) |
$806.72
|
$1,847.90
|
700
|
|
Home and Hardware
(ex. The Home Depot, Sears) |
$1,458.30
|
$4,269.76
|
712
|
|
Jewelry
(ex. Zales, Kay Jewelers) |
$949.07
|
$2,416.10
|
666
|
|
Average Across Categories
|
$853.37
|
$2,094.80
|
695
|
Source: www.creditkarma.com, October 2009
Be Credit Conscious
As the holiday season pulls in this year, the National Retail Federation predicts consumers will spend on average $682 on gifts, decorations, and food. While consumers at these key retailers may not be drastically cutting their credit use or overspending, it appears they are otherwise taking other steps to improve their credit scores—by paying on-time, opening more credit lines, paying down debt, or other credit-healthy actions. Most consumers seem to be headed for the nice list rather than the naughty list when it comes to shopping behavior, and getting rewarded with healthy scores for their good credit habits.
At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!
