Monthly Archives: December 2011

Minimum-Wage Bump Helps Keep Consumers Spending

Florida’s minimum wage will go up 36 cents on Sunday, an increase that will inject an additional $284 million into the state economy next year.

If you’re one of the 380,000 Floridians earning the minimum wage, this boost to $7.67 an hour is cause for celebration and nearly $750 more in your gross annual income.

If you’re the business owner, your reaction might differ.

“Everything that goes up affects the cost of doing business,” said Jeb Stewart, owner of the Beef ‘O’ Brady’s restaurant at 1315 S. Babcock St. in Melbourne.

Waitpersons’ hourly pay will rise 36 cents an hour on Sunday, from $4.29 to $4.65. That means Stewarts’ payroll will grow by up to $748 a year for each employee.

“We’ll deal with it just like we deal with rising food costs,” said Stewart, who has coped with recession, rising food costs and a delayed professional basketball season. “We’ve been thrown curve balls all along. This is one more pitch we’ve got to take.”

Since voters approved a constitutional amendment in 2004, the state minimum wage must be adjusted annually with cost-of-living increases based on the rate of inflation. The increase will add $14.40 a week to the paycheck of someone working 40 hours a week. The yearly increase would total $748.80, while the worker’s yearly salary would reach $15,954.

Arizona, Colorado, Montana, Ohio, Oregon, Washington and Vermont are also raising their minimum wages on Sunday.

This is actually Florida’s second increase this year: A lawsuit by a workers’ rights groups led to a 6-cent increase in June. The group praised the benefits of the new increase.

“Putting more money into the pockets of these workers…will help sustain consumer spending and spur economic recovery,” Christine Owens, executive director of the National Employment Law Project, wrote in a statement.

“The minimum-wage increase is especially important when so many better-paying jobs in sectors like construction, manufacturing and finance have disappeared,” Owens said. “Floridians who do the hard work of cleaning and securing office buildings, providing day care and serving food will not fall further behind as prices for food, gas and utilities continue to rise.”

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Ryanair Defiant Over Credit Card Surcharges Crackdown










A group of 14 people travelling together on Ryanair would pay £168 extra for their flights, despite only making one payment.

Ryanair has defied the government’s move to ban surcharges on payments to airlines and other firms by saying it does not charge its passengers any credit or debit card fees.

Airlines, cinemas and holiday firms will be stopped from imposing millions of pounds in “hidden last-minute” charges on internet bookings. Treasury minister Mark Hoban said the government is prepared to legislate to prevent airlines and other businesses from imposing hefty charges on credit and debit card bookings that are difficult to detect.

However, the budget airline said in a statement: “Ryanair, the UK’s favourite airline, today confirms that it does not impose any debit or credit card fees.”

Ryanair claims instead to charge an “admin fee” per passenger per one-way flight. This £6 charge is levied when a passenger comes to pay and can only be avoided by using the airline’s own prepaid Mastercard. It states on its website that this charge “relates to costs associated with Ryanair’s booking system.”

The charge means that, for example, a group of 14 people travelling together would pay £168 extra for their flights, despite the fact that only one payment is processed for the entire group.

John Holmes, principal economist at Which?, who helped compile a report into excessive card charges which formed the basis of a supercomplaint to the Office of Fair Trading earlier this year, said the Ryanair reaction was typical of the airline and would be dismissed by the government.

“The only time the airline charges that £6 admin fee is when a passenger presents a payment method to the airline,” he said. “The principle of this government legislation is about those charges that are practically unavoidable. You cannot avoid paying for a flight so you cannot avoid the charge.”

Which? says an airline incurs costs of between 8p-20p on debit card transactions. Those rise to between 0.88% and 1.8% of the transaction for payments by credit card. It means a passenger paying the average return fare of £136.09 should pay a minimum of £1.20 and a maximum of £2.45 for a credit card booking. Continue reading

Credit Card Spending Increased Over Holidays

In a turnaround from last year, shoppers were not afraid to pull out the plastic this holiday season. Spending on credit cards jumped 7 percent in November and was up in the first half of December, according to First Data, a company that tracks consumer payment data.

The move back to credit is part of a strategy this year by credit card companies to get people spending on high-interest plastic, and also reflects buoyed consumer confidence. While the increased spending boosts a hurting economy, it also poses risks for shoppers.

And it’s not just plastic that got a seasonal boost. Self-reported spending overall was up 4.1 percent for the period between Nov. 21 and Dec. 25 over last year, according to a recent data from Americans spent an average of $78 per day over the five-week period. The data is based on weekly surveys of more than 3,000 adults in the United States.

Robust spending in the weeks before Christmas led the National Retail Federation to revise its original holiday forecast for November and December. The organization said it expected sales to rise 3.8 percent over the last year’s expenditures for a record $469.1 billion.

Even without the holiday bump in credit card spending, aggressive credit card promotions over the past year have nudged consumer credit card balances higher. At the end of November, American Express, Capital One and Discover Financial Services all reported higher balances by their card holders. U.S. card loans from all three issuers were up over 3 percent compared to November 2010, Dow Jones reported.

The boost in spending helps the American economy overall, as consumption makes up nearly three-quarters of GDP. Credit card companies also get a boost, as they make money both in swipe fees from cards — typically 2 percent to 4 percent of the purchase — along with interest on carried balances.

For consumers, however, spending on credit cards is a slippery slope. Even while balances may be relatively low, compared to their pre-recession heights, the high interest rate can make it difficult to completely pay down cards quickly. For example, it takes 10 months to eliminate an $1,800 balance with an APR of 15.19 percent, the current average rate, with a $200 monthly payment.

Already, one credit counseling organization says it is getting post-holiday interest from consumers concerned about debt. Consolidated Credit Counseling Services, a national nonprofit credit counseling organization, reported a healthy spike in incoming phone calls seeking debt advice on the Monday after Christmas.

“Traditionally we have seen bumps [in business] in mid-January until about March,” said Howard Dvorkin, founder of the Florida-based counseling agency. “Last year there was no bump because spending was so far off.”

However, just because card spending is up, one credit card expert cautions it’s too early to say whether consumers will go into additional debt from holiday purchases. Bill Hardekopf, who runs the card comparison site, says many of the offers this year were targeted at customers who have a track record of responsible credit usage.

“They are great if you are using them right and paying off entire balance on time and they can make money for you,” Hardekopf said. “But if you are not disciplined and don’t pay it off — or you charge more than you can afford — then credit cards are horrible way to pay for things.”

Credit Card Spending Increased Over Holidays (2011, December 28). Retrieved from

Credit Card Cross Fees To Fall To 0.7%

The agreement will cost the credit cards NIS 350 million in annual revenue. 

Credit card cross fees will gradually fall to 0.7% in 2014, and stay at that level through 2018, according to the agreement reached between the Antitrust Authority and the credit card companies. They will submit the agreement to the Restraint of Trade Tribunal for approval within a few days.

The agreement will cost the credit cards NIS 350 million in annual revenue, 10% of their current revenue.

“This isn’t good for us, but the regulator is stronger than we are,” said the CEO of one company. The companies reportedly set a red line of a 0.75% cross fee, but agreed to compromise, since the agreement is for seven years, and provides certainty through 2018.

Antitrust Authority director general David Gilo also compromised. In May, Antitrust Authority chief economist Dr. Shlomi Frizet advised lowering the cross fee to 0.638%. The Antitrust Authority agreed to the higher level partly because of the company tax hike.

In the economic paper submitted to the Restraint of Trade Tribunal, Frizet assumed a future drop in the company tax to 19%, on the basis of the government’s tax cutting plan. However, in the wake of the summer’s social protest and the Trajtenberg Committee’s recommendations, the company tax was raised to 25%, beginning in 2012.

Under the new plan, credit card cross fees will fall from the current rate of 0.875% to 0.8% in July 2012, 0.75% in January 2013, 0.73% in November 2013, and 0.7% in July 2014, and stay at that level through the end of 2018. After the court approves the agreement, Israel’s three credit card companies can operate as a transaction clearing cartel through 2018.

The Antitrust Authority and the three credit card companies – Isracard Ltd., owned by Bank Hapoalim (TASE: POLI); Leumi Card Ltd., owned by Bank Leumi (TASE: LUMI) and Azrieli Group Ltd. (TASE: AZRG), and Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa), owned by Israel Discount Bank (TASE:DSCT), and First International Bank of Israel (TASE: FTIN) – negotiated the issue of cross fees for years. In 2006, the parties reached a deal to gradually reduce the fee from 1.25% to 0.875% over six years.

The parties also agreed that the fee, which is a restraint on trade, would be set by the Restraint of Trade Tribunal. In August 2011, Judge Nava Ben Or brought the last reduction forward by eight months from July 2012 to November 2011.

Israel’s credit card market has an annual turnover of NIS 200 billion. Since the reduction in cross fees will result in an equivalent reduction in clearance fees paid by businesses, in theory, a 0.1% reduction in the cross fee should reduce the credit card companies’ revenue by NIS 200 million. However, there is a risk that businesses might not pass the savings onto consumers, as the fee amounts to a tiny fraction of the price of goods.

The cross fee, which a credit card company charges a business for transactions by a customer is paid to the company that issued the customer’s card. This fee is the basic expense of the clearing company, and is therefore the lower limit of the clearing fee that the credit card company charges businesses.

Credit Card Cross Fees To Fall to 0.7%. (2001, December 29). By Eran Peer. Retrieved from

Card Hub’s 6 Credit Predictions For 2012 Offer Glimpse Of Future For Consumers’ Wallets

Learning something new, saving money, and lowering stress are among the 10 most commonly broken New Year’s resolutions, according to Time. This need not be the case, however, and you can even get a jump on bringing these annual vows to fruition before the clock strikes midnight on New Year’s Eve. How? By considering predictions for U.S. credit in 2012 and using these educated glimpses into the future to improve personal financial performance. The credit industry affects all facets of personal finance and being ahead of the curve when it comes to credit issues could certainly help you save money and thereby lower stress. At the very least, you might learn something new!

Prediction: Lucrative credit card sign-up offers will continue through 2012
What that means for you: You may or may not have heard about credit card companies offering rewards bonuses worth up to $800 and 0% introductory interest rates for as long as 24 months in return for new customers opening cards in 2011. While the exact offers will surely fluctuate, we can expect the general trend to continue in 2012. For people with excellent credit, that means the potential to garner free flights, hundreds of dollars in free money, and heaps of time to pay down debts without the hindrance of interest.

Prediction: More credit will be available
What that means for you: Believe it or not, credit card companies also had tough times during the Great Recession, and that’s largely why it became difficult for many consumers to obtain credit. Issuers were forced to become more conservative in their underwriting. But as the economy has improved, we’ve seen a reversal of this trend, meaning more people will be able to get unsecured credit cards and loans during 2012. If you do indeed get one, just remember to learn from the lessons provided by the financial downturn and only spend within your means!

Prediction: Credit scores will rise
What that means for you: Not only did unemployment reach a 32-month low in November at 8.6%, but the average rate thus far in 2011 (8.99%) is also significantly lower than the 9.6% we saw in 2010. What does that mean? For one, it means that more and more consumers have been able to meet their monthly financial obligations — also illustrated by the decline in delinquency rates. In addition, it means that credit scores will rise in 2012. You see, as more consumers make on-time credit card and loan payments, they will gradually add positive information to their major credit reports and thereby devalue negative information attributable to the Great Recession, causing their credit scores to subsequently rise. In other words, this is a process and tangible benefits should be seen in earnest during 2012.

Prediction: Expect a prepaid card/credit card push & a debit card downfall
What that means for you: Debit cards were the center of attention in 2011, as the Federal Reserve instituted a cap on the fees banks could charge merchants whenever debit cards are swiped and many banks subsequently eliminated debit card rewards and/or attached new fees to checking accounts. For this reason, we can expect a number of things in 2012: 1) fewer people will use debit cards; 2) credit card rewards will be relatively more attractive; 3) prepaid cards will become more popular as replacement checking accounts. You should therefore prepare for changes to your everyday banking and be on the lookout for the best credit cards and prepaid cards.

Prediction: Don’t expect new personal finance legislation
What that means for you: While the CARD Act changed the personal finance landscape for the better, it changed it nonetheless, and that took some getting used to. In 2012, consumers can look forward to the same increased transparency and improved rights, yet fewer adjustments.

Prediction: Sovereign European debt won’t cause further damage
What that means for you: Even if you couldn’t care less about the goings on in Europe, the interconnected nature of the modern global economy means the continent’s debt crisis does affect our finances here in the U.S. Luckily, I foresee the implementation of stop-gap measures that will ensure economic stability in the short-term, rather than default on the national level across the pond. Therefore, the U.S. economic recovery should continue in 2012, and the positive trends we are seeing in our personal finances will not be impeded.

Ultimately, it looks like 2012 is going to be better than 2011. I mean, it hasn’t even begun and you’ve already learned something new about saving money, which hopefully brought down your stress levels!

Odysseas Papadimitriou is the founder and CEO of Card Hub, an online marketplace where you can compare credit cards and prepaid cards as well as sell gift cards for cash.

Card Hub’s 6 Credit Predictions For 2012 Offer Glimpse Of Future For Consumers’ Wallets. (2001, December 26). By Odysseas Papadimitriou. Retrieved from

E-Commerce Promotes Modernization In Rural China

Electronic commerce has spread throughout many parts of rural China in recent years, arousing public attention nationwide.

Jiang Qiping, General-secretary of the Research Center of Information at the Chinese Academy of Social Sciences, says three of this year’s top ten online merchants selected by the internet trade site are based in rural China.

He also says the number of online shops and merchants in rural China this year is expected to hit a record number.

“By the end of August, the volume of online shops and merchants in rural areas had reached 300-thousand and 500-thousand, respectively. Online merchants from rural areas, most of whom are migrant workers, can earn an annual income of between 24-thousand yuan and 60-thousand yuan.”

Zhang Ruidong, an e-commerce expert, believes that because of the global financial crisis, migrant workers who learned about e-commerce in cities have returned home with their newfound skills to start their own businesses.

33-year-old Wang Xiaobang comes from a small village in west China’s Shanxi Province. After working in Beijing for seven years, he opened an online shop selling local products on, China’s most popular e-commerce website.

Wang says e-commerce has brought about many positive changes in his life.

“Our total sales last year hit over two million yuan, and this year they may hit 2.6 million yuan. Now my parents, wife and children have a better life than they did before, and I drive my mini-van to purchase grain.”

Besides migrant workers, many college students from rural areas have also embraced e-commerce.

Du Qianli, a former graduate student at Zhengzhou University in central China, failed to find a decent job in several cities after he completed his studies. But then he stumbled upon the idea of leading his fellow villagers in selling mountain products such as fruit and medicinal herbs on the internet. The products appealed to many urban consumers. A year later, Du was able to repay 60-thousand yuan in student loans, while the villagers’ income increased with the money they earned from their e-commerce venture.

“I’m the first one to do e-business in my village. In the beginning, my villagers couldn’t believe that we could sell agricultural products on a computer and earn money. When our sales hit one million yuan in 2010, they were very surprised. They saw the truth that the internet could play such a big role in the countryside, so they gradually accepted it.”

Wang Xiangdong, Director of the Research Center of Information at the Chinese Academy of Social Sciences, says thanks to the rapid development of e-commerce in rural China, agricultural products have richer marketing channels, farmers now have munificent rewards, and rural areas have been able to continue modernizing.

E-Commerce Promotes Modernization In Rural China. (2011, December 26, 2011). By Su Yi. Retrieved from

Consumer Spending, Personal Income Both up 0.1%, For November 2011

The Personal Income and Outlays report for November covers individual income, consumption and savings. Consumer spending increased 0.1% while disposable income had no change. Personal income increased 0.1% There are two things to garner from this month’s numbers. Consumer spending is mute and wages, salaries declined. Additionally, that great Black Friday record sales hype is not materializing in the aggregate spending numbers to date, as we pointed out in the retail sales overview. The personal income & outlays report is seasonally adjusted.

Personal consumption expenditures are often called consumer spending and in real dollars, or adjusted for price increases, is up 0.2% for November. Real Personal Consumption Expenditures, or PCE, are about 70% of GDP, and a monthly 0.2% increase is mediocre for Q4 GDP growth implications. Real means chained to 2005 dollars, or adjusted for inflation and are the values which are part of GDP. Below is a graph of real PCE.

Consumer spending is not just smartphones, toys and Starbucks. Things like housing, healthcare, food, gas are part of consumer spending. Consumer spending for the majority is spending to pay basic living necessities. Graphed blow is the overall real PCE monthly percentage change.

Here’s what people spent money on in November, adjusted for prices, or in real dollars. Health care, for example, is a service. Gasoline is a nondurable good.
Purchases of durable goods increased 1.1% in November, compared with an increase of 1.3% percent in October. Purchases of nondurable goods decreased 0.1%, in contrast to an increase of 0.2%. Purchases of services increased 0.1%, in contrast to a decrease of less than 0.1%.
Price indexes are used as divisors to adjust for inflation and price changes. The indexes are used to compute spending and income for an apples to apples, real dollar comparison to previous months and years. Economic statisticians use real dollars so one does not erroneously assume economic growth when it’s really inflation. The PCE price index had no change for the month, but is up +2.5% for the year. Minus energy and food, the price index increased +0.1% and is also up +1.7% for the year. The energy price index decreased –1.6% for November and is up 13.1% for the year. Anyone at the pump knows there is finally relief on gas prices recently. The food price index decreased -0.1% for the month and is up +5.0% for the year. While the PCE price index represents inflation, it is different from CPI.
Personal income increased +0.1% in November and these numbers are the total for everybody in the United States who is reported and not part of the underground economy. Below is personal income, not adjusted for inflation, or price changes.

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Consumer Spending, Personal Income both up 0.1%, for November 2011. (2011, December 23). Robert Oak. Retrieved from