Posts Tagged
‘Credit Cards’
by ilene - September 8th, 2010 10:53 pm
Courtesy of Mish
Consumers have had enough of high interest rates on credit cards but its a case of one plastic for another. Bloomberg reports Cardholders Prefer Debit as Credit-Card Use Falls
Americans are shunning their credit cards and using debit to avoid incurring more debt, said Javelin Strategy & Research.
Total payment volume for debit cards surpassed credit-card volume for the first time in 2009 and will continue to eclipse it in 2010, according to a report released today by the Pleasanton, California-based market-research firm that specializes in financial services.
At San Francisco-based Visa Inc., the world’s biggest payments network, the total payment volume for debit cards increased by 7.9 percent in 2009 to $883 billion as credit-card volume declined by 7.3 percent to $764 billion. Volume for debit cards at No. 2 MasterCard Inc. in Purchase, New York, rose by 5.8 percent and 2.8 percent at No. 4 Riverwoods, Illinois-based Discover Financial Services.
Fifty-six percent of consumers said they had used a credit card in the past month compared with 87 percent who said they had in 2007, according to the study, which surveyed 3,294 people in November 2009 for that question. Other findings were based on data collected online from 5,211 respondents in March 2010 and 5,000 consumers in November 2009. If the rate of decline continues, 45 percent of consumers will reach for a credit card in 2010, the study said.
Long-Term Shift
Another cause for reduced credit-card use is financial reform aimed at protecting consumers, which has decreased the number of new cards given and cut available spending limits, the Javelin report said. Federal legislation that limits overdraft fees, caps on fees banks charge merchants for debit-card transactions and credit-card legislation mean banks have to recoup losses and are only giving cards to the most creditworthy borrowers, the study said.
Younger people also favor debit over credit because of the immediate nature of making a payment, which means the shift to debit will be long-term, said Van Dyke. And since younger cardholders favor the convenience of debit cards, they won’t turn to cash or checks, he said.
Purchase transactions generated by credit and debit cards in the U.S. totaled more than 27 billion from Jan. 1 through June 30, according to the Nilson Report, an industry
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Tags: consumers, credit card debt, Credit Cards, debt, Mish
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by ilene - April 2nd, 2010 1:28 pm
Sorry Jamie, don’t look to Jr. Deputy Accountant for sympathy. – Ilene
Courtesy of Jr. Deputy Accountant

Pic credit: LOLFed
What a cry baby. In last year’s letter, Dimon whined that the company only made a paltry $6 billion in 2008 when they should have made more like $15 billion and would have were it not for that meddling financial crisis and what-have-you. Cry cry cry.
WaPo:
J.P. Morgan Chase cut consumer access to credit and canceled credit cards in response to legislation signed into law by President Obama last year, the bank’s chief executive Jamie Dimon said. The credit card reform act, which went into effect in February, could cost the bank up to $750 million in annual profits, he added.
Despite the losses, "we believe that many, but not all, of the changes made were completely appropriate," Dimon said in his annual letter to shareholders, which was released late Wednesday.
Dimon said enacting the bill in the middle of a recession reduced access to credit for some consumers. The act prevents credit card companies from raising interest rates arbitrarily and charging certain fees. It also mandates that all of a cardholder’s payments be applied to the balance carrying the highest interest rate.
J.P. Morgan is expected to take a hit of $500 million to $750 million from the new rules, according to Dimon, who added that the bank will no longer offer cards to 15 percent of its customers because they pose too much of a risk in light of the regulations. The bank has reduced credit lines, canceled cards that had not been used for a long time, and substantially reduced offers for introductory rates and promotional balance transfers.
Dimon is also feeling some bankster remorse for using the FDIC’s guarantee program to issue some $40 billion in unsecured debt, claiming that JPM never needed it and shouldn’t have touched it because of the stigma associated with bailed out banks.
Cry. Me. a F*&king. River. You. Whiny. Asshat.
Tags: Credit Cards, FDIC, Interest Rates, Jamie Dimon, JPMorgan
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by ilene - March 10th, 2010 12:24 pm
Karl asks why do we let Congress and the Federal Reserve continue their reign of assault against us. - Ilene
Courtesy of Karl Denninger at The Market Ticker
No, that’s not a misprint.
Let’s say you went to Starbucks and bought a $5 Latte. You swiped your debit card and didn’t have the $5 in your account.
Bank of America would charge you a roughly $30 overdraft fee, amounting to 600% of your purchase for a loan of that $5 for as little as one day. That’s bad enough.
Let’s assume you paid that overdraft fee (and the $5) in one week. There are 52 weeks in a year and the bad news is that when computing the annual percentage rate you must divide the interest charged by the percentage of a year you held the money to get the APR. Thus, 31,200% interest on an "annualized" basis, assuming you pay it in one week (it’s 218,400% if you pay it off the next morning!)
The bank will soon stop doing this, and in fact is mandated to do so without getting permission first for each transaction, as of June 1st.
The question that should be asked is why we should have to wait until June 19th for new accounts, or August 1st for existing accounts, never mind why this sort of outrageous behavior has been permitted in the first place.
Guido on the corner typically will charge you something obscene like 500% interest over the course of a year.
The banksters put Guido to shame.
How much do the banksters make off this? Some $1.77 billion annually, at last count. None of which, I might add,…

Tags: Bank of America, banking industry, Credit Cards, finance charges, interest, usury
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by ilene - February 23rd, 2010 8:34 am
Courtesy of TIME
Have you ever seen your credit card’s interest rate be jacked up, out of the blue, for no apparent reason? You’re not alone, and a new law hopes to cut down on such unsavory practices. The Credit Card Accountability, Responsibility and Disclosure Act, signed by President Obama in May 2009, went into effect last fall. Many of the provisions, however, are finally taking hold on Monday, Feb. 22. This latest step in a three-part rollout will continue the Obama Administration’s quest to eliminate predatory lending by banks and make the overall process of using and paying off credit cards much more transparent — and far less perilous for individual credit histories.
Among other changes, the new law will:
• Require credit-card companies to tell customers when they plan to increase rates or other fees.
• Mandate standard payment dates and times, to keep companies from tripping you up into late charges by moving your due date.
• Limit fees such as charges for exceeding your credit limit or paying your bills online or over the phone.
• Mandate that monthly statements clearly show how long it would take to pay off your balance by paying the minimum due each month.
• Curb interest-rate hikes by prohibiting credit-card companies from retroactively raising rates on existing balances until the customer is 60 days behind on payments.
• Forbid credit-card companies from automatically enrolling customers in often pricey programs that offer the option to charge beyond the credit limit.
• Crack down on marketing campaigns targeting college students and other young adults, requiring anyone under age 21 who wants a credit card to either demonstrate the means to pay the debt alone or get an adult to cosign on the account.
• Ban the practice of double-cycle billing, in which your creditor uses your average balance over the current and previous billing cycles rather than the previous one — a trick that can wind up costing you a pretty penny.
Tags: Credit Cards, credit-card companies, fees, Interest Rates
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by phil - February 13th, 2010 8:29 am
Last week we talked about Predatory Lending.
This graphic (click to enlarge) gives a good diagram outline of the basics to avoid. Most of them make their money by charging fees that seem reasonable but turn out to be insane: Payday Loans that can hit you with 360% interest, Rent-To-Own arrangements that have you paying two to three times more than the item costs and, of course, the second greatest scam of them all – Credit Cards – particularly the ones that are supposed to help people "re-establish" their credit. What is a greater scam on the American consumer than credit cards, you may ask? Why your home mortgage of course!"
Now I know you, my sophisticated readers, find it obvious that ARMs and Balloon Payments are bad ideas but, in my previous life in the real eastate title business, I found that even the most savvy investor often fails to consider the long-term costs of even a conventional mortgage. Many people make poor home investing decisions because they don't fully understand the debt they are taking on or the alternatives available to them.
This did not matter when homes went up and up and up because even a bad investment made a little but "this time it IS different" and we may be in for an entire decade in which we may not see ANY rise in the value of homes – this is what has happened to Japan for the last TWO decades. I'm going to go over some of the numbers, give you a few tools and see if we can't find some ways save you $100,000 on a $200,000 loan and show you how to set your kids up for life - does that sound interesting?
Home Costs
Currently homes are, at least, reasonably priced in many parts of the country and the government is offering a first-time home buyer tax credit of $8,000, provided that you stay in the home for 36 months. This isn’t a tax deduction like your mortgage interest, which reduces your taxable income – a tax credit actually reduces your total income taxes owed. In addition, some states, such as California, are offering tax credits for home buyers that will further reduce your tax liability. Keep in mind that the federal program ends on April 30th of this year, and while it could end up being extended, it isn’t a given.
As a…

Tags: Credit Cards, Income Distribution, Mortgage modifications, Mortgages, Payday Loans, Rent to Own, Saving Money, Wealth Building, Wealth Gap
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by ilene - December 30th, 2009 1:51 am
Courtesy of Mish
Given there has been a financial recovery of sorts, but no recovery at all on main street, it should not be surprising to see Credit-Card Delinquencies Rise Again.
The rate of charge-offs on U.S. credit cards rose more than a half-percentage point in November, snapping a two-month run of drops from an all-time high in August, and delinquencies rose for the fourth consecutive month, Moody’s Investors Service said.
Charge-offs, which are those loans a credit-card company doesn’t think it will be able to collect, were 10.6% for November, compared with 10% in October. The ratings firm also said the delinquency rate, which gives a glimpse of issuers’ potential losses and how much they may need to set aside in reserves, rose to 6.2% in November.
Bank of America Now Choking on Growth at any Cost Policy
Please consider New Chief at Bank of America Seeks Credit-Card Fix
When Bank of America Corp.’s new chief executive takes over next week, one of the first problems he will face is one he’s already been grappling with—the bank’s credit-card business.
"We gave a lot of cards out to our customers," Mr. Moynihan said in a Nov. 5 speech. "We were giving them to too many people." He discussed a "repositioning" of the business that would rely less on borrowing and more on card transactions, while acknowledging that the business won’t be as big or as profitable as it used to be.
Bank of America is the second-largest U.S. card issuer, after J.P. Morgan Chase & Co., and the card division accounts for 23% of BofA’s revenue through the first nine months of 2009. Yet cards also lost $4.5 billion during that same period, making it the worst-performing Bank of America business line. It also had a default rate higher than other major rivals, at 13%.
The current problems have their root in Bank of America’s push to become No. 1 in the card business. In 2006, it purchased MBNA Corp., one of the nation’s biggest credit card issuers, for $35 billion, hoping to combine the card company’s marketing and underwriting skills with its own massive branch network.
But in its pursuit of market share, Bank of America made poor underwriting
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Tags: Bank of America, charge-offs, Credit Cards, Delinquencies
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by ilene - December 29th, 2009 1:24 pm
Courtesy of Vince Veneziani at The Business Insider/Clusterstock
Disappointing news on the consumer front, courtesy of the latest charge-off numbers:
WSJ: The rate of charge-offs on U.S. credit cards rose more than a half-percentage point in November, snapping a two-month run of drops from an all-time high in August, and delinquencies rose for the fourth consecutive month, Moody’s Investors Service said.
Charge-offs, which are those loans a credit-card company doesn’t think it will be able to collect, were 10.6% for November, compared with 10% in October. The ratings firm also said the delinquency rate, which gives a glimpse of issuers’ potential losses and how much they may need to set aside in reserves, rose to 6.2% in November.
Read the whole story — >
See Also:
Tags: Credit Cards, Economy, Financial Crisis, retailers
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by ilene - November 30th, 2009 3:59 pm
Courtesy of Mish
Inquiring minds note a huge shift in consumer attitudes towards credit cards. Please consider Cash is king for holiday shoppers.
Cash was king for consumers who shopped over the Thanksgiving weekend, according to survey results released on Sunday, and that factor could have cost retailers additional sales.
Only 26 percent of people who shopped over the weekend said they used credit cards for their purchases, according to a poll conducted for Reuters by America’s Research Group.
"That’s an amazing shift in consumers’ habits," said Britt Beemer, founder of America’s Research Group.
A total of 39 percent said they used cash, while the remaining shoppers used debit cards, the survey showed.
Consumers shunning credit cards is a bad sign for retailers, since people who buy gifts with a credit card tend to spend anywhere from 20 to 40 percent more on the gift, Beemer said.
Every Retailer Wants To Be A Discounter
The National Retail Federation has this Black Friday Verdict: Number of Shoppers Up, Average Spending Down.
As the closely-watched Black Friday weekend winds down, a National Retail Federation survey conducted over the weekend confirms the expected: more people spent less. According to NRF’s Black Friday shopping survey, conducted by BIGresearch, 195 million shoppers visited stores and websites over Black Friday weekend*, up from 172 million last year. However, the average spending over the weekend dropped to $343.31 per person from $372.57 a year ago. Total spending reached an estimated $41.2 billion.
Shoppers’ destination of choice over the past weekend seemed to be department stores, with nearly half (49.4%) of holiday shoppers visiting at least one, a 12.9 percent increase from last year. Discount retailers took an uncharacteristic back seat, with 43.2 percent of holiday shoppers heading to discount stores over the weekend and another 7.8 percent heading to outlet stores.** Shoppers also visited electronics stores (29.0%), clothing stores (22.9%), and grocery stores (19.6%). As millions of shoppers gear up for Cyber Monday, one-fourth of Americans shopping over the weekend (28.5%) were shopping online.
“In an economy like this one, every retailer wants to be a discounter,” said Tracy Mullin, NRF President and CEO. “Department stores have done an admirable job touting both low prices and good quality, which are important requirements for holiday shoppers on a
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Tags: Ben Bernanke, Cash, Credit Cards, holiday shoppers
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by ilene - October 14th, 2009 9:16 pm
Courtesy of Jesse’s Café Américain
While the world suffers, Wall Street pays itself record bonuses, larger even than the peak year of 2007, by taxing the productive economy to maintain an extravagant lifestyle. These bonuses are being paid with your money, and your children’s money, if you hold US dollars.
And while this happens, the US credit card banks are raising interest rates to 20+% even on customers with excellent payment records and jobs which is certainly usury, and with an arrogant impunity. The insider trading scandals and tales of government graft yet to be told are so blatant and shocking that only a captive mainstream press keeps them from being investigated.
The rest of the world looks on in shock and amazement. What has gone wrong with America? What are they thinking? America has not only lost the high ground, it is sliding into a ditch.
While Americans are pacified by bread and circuses, the rest of the world looks at a painful reality show in the States, a country in a death spiral of corrupt leadership and public apathy. If it was Zimbabwe or Iceland there would still be sympathy for the people, but far less concern.
A deflationist friend was railing about the US slide into bankruptcy, and I could not help but ask, "What happens to the paper of a bankrupt company, or country?"
Where indeed will the dollar gain its long anticipated strength, its renaissance of value?
Or yes, from "less dollars" through debt destruction. Mutant monetarism gone mad, an argument worthy of Herr Goebbels. The dollar will rise in value by immersing itself in a pool of corruption, and by destroying its shareholders, those who hold their savings in it, while oligarchs loot the financial system. Unless the US can turn its trade balance positive overnight, while raising interest rates, and maintaining a growing domestic economy based on consumption, it is not going to happen. The US is running out of degrees of freedom.
Wall Street holds the US public and government hostage by threatening financial armageddon if they do not get what they wish. We would anticipate a similar threat to the global economy based on dollar debt at some point, asking for a global monetary regime controlled out of New York and
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Tags: Credit Cards, government graft, record bonuses, U.S. banks, Wall Street
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by ilene - September 16th, 2009 12:29 am
Courtesy of Mish
Last month’s improvements in credit card defaults appears to be an outlier. Credit card defaults have resumed their natural tendency to track rising unemployment.
Inquiring minds are reading U.S. credit card defaults up, signal consumer stress.
Bank of America Corp and Citigroup Inc customers defaulted on their credit card debts in August at the highest rates since the onset of the recession, a sign that the banks’ consumer lending woes are far from over.
"The defaults are a wake-up call for those expecting a V-shaped recovery," said Elliot Spar, options market strategist at Stifel Nicolaus & Co.
Bank of America said its charge off-rate — loans the company does not expect to be repaid — rose to 14.54 percent in August from 13.81 percent in July.
Citigroup, the largest issuer of MasterCard-branded credit cards, said its charge-off rate rose to 12.14 percent in August from 10.03 percent in July.
The charge-off rates for both Citi and Bank of America, two of the biggest recipients of U.S. government bailouts, were the highest yet during the financial crisis.
JPMorgan Chase & Co, the largest issuer of Visa-branded credit cards, said its charge-off rate rose to 8.73 percent from 7.92 percent, while smaller Discover Financial Services said its rate rose to 9.16 percent from 8.43 percent.
American Express Co’s default rate fell to 8.5 percent from 8.9 percent as the company increased its lending portfolio.
JPMorgan, Discover and Capital One Financial Corp reported late payments on credit cards — an indicator of future defaults — rose in August after several monthly declines.
As credit card losses rose to record highs in recent months, credit card companies closed millions of accounts, trimmed lending limits and slashed rewards.
Lenders are also raising fees and interest rates ahead of a new law that increases protection for consumers. The law is expected to shrink the industry and limit subprime borrowers’ access to plastic money.
Unemployment is likely to rise for another year, then flatten out so it is likely that card defaults keep rising for quite some time.
Rising fees will make up some of the difference. However, the millions of closed accounts and reduced minimums will curtail consumer spending going forward. That is a good thing as well as part of the healing process. Yet, along
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Tags: Bank of America, Capital One Financial Corp, Citi, consumer attitudes, consumer spending, Credit Cards, defaults, Discover, JPMorgan, rising fees, unemployment, weak earnings growth
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