Tag Archives: credit card issuers

Why Business Credit-Card Holders Should Be Wary

Most small business owners are aware that their personal finances and business finances are inextricably linked. Apply for a small business loan, and the bank will ask for a personal credit score. Miss a payment on a business credit card, and the issuer is likely to report the transgression on the owner’s personal credit profile. Credit-card issuers can also go after personal assets in the case of default.

Since issuers treat business owners as proxies for their companies, it might seem business credit-card accounts would be afforded the same protections as are personal credit-card holders. Not so, says Odysseas Papadimitriou, chief executive of credit-card comparison website CardHub.com. Four years after Congress passed the Credit Card Accountability, Responsibility, & Disclosure (CARD) Act to make credit-card borrowing more transparent, business owners lack protection that individual consumers get. Continue reading

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Prepaid Card Competition Is Bringing Down Fees

Large banks are entering the prepaid debit card market and helping drive down fees.

Big national and regional banks are also making fees less complicated by offering low, fixed monthly costs, says Greg McBride, senior financial analyst at Bankrate.com, which released a survey of prepaid debit cards today.

The survey found that 13% of issuers, mainly large banks, charge a single monthly fee of $4.95 to $7, says Bankrate.com. Continue reading

Credit-Card Spending Makes A Comeback As Confidence Rises

Consumers’ aversion to credit cards seems to be waning.

Revolving credit is rising, and many credit-card issuers have revved up marketing in hopes of winning new customers.

On Thursday, American Express Co. (AXP) and Capital One Financial Corp. (COF) said U.S. card balances grew in the fourth quarter.

American Express, which lends mostly to affluent customers, said its portfolio of U.S. card loans grew 4% from a year ago to $53.7 billion.

Capital One’s credit card loans in the U.S. grew 5.1% from a year earlier, to $56.6 billion. Most of the loan demand came towards the end of the quarter, Chief Financial Officer Gary Perlin told analysts during a conference call. Chief Executive Richard Fairbank said the bank sees “continuing signs of traction in our domestic card business.”

The holiday shopping season likely helped drive the increase, but experts say some consumers have also grown more confident in their ability to use credit cards after reining in spending following the recession.

“What’s going on is a combination of increased confidence on both the issuer and the consumer side,” said Ben Woolsey, director of marketing and consumer research at CreditCards.com, a website that tracks credit-card offers.  “The indicators are starting to look positive. I think the combination of holiday spending and consumer sentiment is causing people to feel a bit freer to spend on credit cards.”

Many borrowers shunned plastic following the recession, as they worked to rid themselves of debt hangovers brought on when credit cards were easier to get. Banks also pulled up stakes, targeting consumers with only the most pristine credit.

But as more borrowers paid their bills on time, issuers grew more aggressive in going after new customers last year.

U.S. consumers received 447 million credit-card offers in the mail in November, up from 346 million a year ago, according to the most recent monthly numbers available from Mintel Comperemedia. Continue reading

What’s New For Credit Cards In 2012

 

As the credit card offers fill your mailbox and you see more TV ads for credit cards, you may think that the credit card issuers are looking for new customers. And you’re right. If 2011 wasn’t your year for credit, 2012 might be better.

We talked to credit card experts to find out what consumers can expect in 2012 in terms of lending standards, rewards, debit cards and other forms of payment.

How’s your credit?

“Lenders and issuers will still be strict with underwriting, but not as strict,” says John Ulzheimer, president of consumer education at smartcredit.com. “A consumer with a FICO 600 score will get decent credit card offers.”

Ulzheimer analyzed recent data from FICO, which shows that credit scores have been going up for more people. “People have been making changes in how they manage credit, which is what has caused the large movement in scores,” Ulzheimer says. “They’ve been paying down credit card debt and loans, and maybe they got something negative off their credit report.”

“Banks have been increasing their offers of credit,” says Dennis Moroney, research director at the Tower Group, an industry consulting firm based in Boston. “The issuers have been modestly going into lower-band credit scores, to people with a lower income.”

“It’s interesting how quickly the rewards programs have ramped up since the recession,” says Curtis Arnold, founder of CardRatings.com and a consumer advocate. “The rewards credit standards may be a bit looser for those with lower credit scores, but those cardholders will have higher rates.”

“The issuers are looking for someone who will be an aggressive charger,” Arnold says. “That may be more important than the credit score.”

Reward me

Rewards credit cards are still the most popular type of card. “Seventy-eight percent of offers are rewards now,” says Moroney, “whereas it was down in the 50s in 2009. Banks want to develop a relationship with customers and have them use more products, especially a checking account.”

Expanding the banking relationship may be one reason that the 0% balance transfer offer is making a comeback. “The zero-percent balance transfer offers are amazingly aggressive,” says Arnold. “A year ago there were hardly any, then there were a few with a six-month range, and it’s now going up to 18 or 24 months. The length of these offers will continue to expand.”

“The big drawback to the great zero-percent offer has been no cap on the fee, but fees may start to come down” in 2012, Arnold says. “Three percent will be typical. And maybe the fee cap will come back too.”

More cash back

“Cash-back rewards will still be king,” says Arnold. “The next threshold in rewards will be higher cash-back rates. Capital One introduced 1.5 percent cash back with its Capital One Cash MasterCard.”

With the Capital One card, you initially get 1 percent cash back on every purchase. On the anniversary of your card activation, you get a 50 percent bonus on everything you’ve earned during the previous 12 months.

“Other issuers will meet the bar that Capital One set,” says Arnold. “American Express Blue Cash Preferred offers 6 percent cash back on gas. I think (other) category rewards will be higher too, in the 5 percent to 6 percent range.” Category rewards are bonus rebates in rotating categories such as home improvements, fuel, restaurants and clothing.

Perk me up

Other offers to take a look at are travel or airline cards that offer perks. “Premium perks that have been associated with high-fee charge cards will be more commonplace for the average Joe,” Arnold says. “No foreign transaction fees, covering baggage fees, priority boarding – these will appeal to consumers tired of being nickel-and-dimed with junk fees.”

“It would be fun to be in the marketing department of a credit card company now,” says Ulzheimer. He cites several reasons why we’re seeing so many aggressive offers: “The cap on debit card fees has led banks to encourage consumers to stop using debit cards and use credit cards instead. We just went through a migration away from banks to credit unions. In six weeks, credit unions say they’ve gotten 650,000 new customers. So the issuers are trying to refocus and attract us to the big banks. Banks want consumers to say, ‘Wow, look how good that offer is.'”

“It’s a great time to be a consumer,” Arnold says. “If you have had an old card for umpteen years, you should look around and see what you can get, if your financial house is in order. Look for a better deal.”

Death of debit rewards?

The debit card fees that were tested by a few large banks created a storm of criticism from consumers, and all of those banks have now retracted those fees. “Debit cards had negative publicity, which helped move people more to credit cards,” Arnold says. “But debit rewards programs are a permanent casualty of everything and legislation.”

“Debit rewards will go away unless they’re integrated into duo cards or are part of a larger banking relationship,” says Moroney. “The American consumer has gotten comfortable with debit. GenX and GenY grew up with debit. The duo cards may become more common so that at the point of sale, the consumer makes the choice.”

Credit card security

Mobile applications are being developed for every kind of product, and credit cards are not being left out. But will consumers bank by cellphone? Ulzheimer doesn’t think so. “There are plenty of efficient ways to move money from one place to another, ways that are more secure than using the cellphone. Mobile banking will die a quick and bloody death as soon as there’s a major hack into a network. And no one is immune to hacking.”

Security remains a big concern in the banking industry, Moroney says. “Chip-and-PIN cards are gaining momentum with Visa stepping in. Card-present fraud is not a big deal here, and the chip is intended to protect against that. And online security is not a concern. Chip-and-PIN cards are happening, but it will be slow. Merchants don’t want to pay for new terminals to accept the cards.”

Another worry in the credit card industry is how they will market their brand on a mobile device. “They’ve made an investment on the card landscape with their brand. With mobile, all that goes away. What does that mean for banks? Are they going to put their icon on a screen?”

The question for credit card issuers, says Arnold, is “How do you acquire new customers in a saturated market? You do anything to make your card stand out to consumers.”

For consumers, 2012 may be the year to get back into credit cards.

What’s New For Credit Cards In 2012. (2011 December 21). Ellen Cannon Retrieved from http://www.foxbusiness.com/personal-finance/2011/12/21/whats-new-for-credit-cards-in-2012/

Feds Try Out Simpler Credit Card Agreement

December 11, 2001

A simpler credit card agreement is getting a tryout.

The Consumer Financial Protection Bureau has released a prototype of a credit card agreement that’s written in plain English. The idea is to sweep away the legalese and make it easier for consumers to understand a card’s costs and terms.

The agency is asking for the feedback on the model agreement, which is at www.consumerfinance.gov/credit-cards/knowbeforeyouowe.

For now, there are no plans to require credit card issuers to adopt the form. But if the agency decided to make the form mandatory once testing is over, it could establish a consistent, industrywide template that would make it easier for consumers to comparison shop for cards.

As it stands, the Consumer Financial Protection Bureau noted that the average credit card agreement runs 5,000 words and is packed with fine print that consumers don’t understand. The prototype agreement, by contrast, is just over 1,000 words and is broken down into three key sections — costs, changes and additional information.

The form will be tested with new credit card applicants at the Pentagon Federal Credit Union. Some applicants will get the existing version of the credit union’s card agreement so that the CFPB can compare consumer feedback.

The American Bankers Association, which represents the banking industry, praised the model form as a “good first step,” but said it could be made even shorter and less susceptible to costly lawsuits.

The Consumer Financial Protection Bureau was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act to police the financial products marketed to consumers. Consumer advocates have said that clearer mortgage disclosures could have helped prevent the subprime crisis that precipitated the financial meltdown.

Since it officially began operations this summer, the agency has focused on simplifying disclosures consumers receive with a variety of financial products. The agency is also testing simplified forms for mortgages and has asked for feedback on the issues borrowers encounter when applying for private student loans.

The rollout of the sample credit card agreement comes as the White House urges the Senate to confirm Richard Cordray to head the consumer bureau. Republicans have said they will block confirmation of anyone to head the agency until other regulators and Congress have more control over the bureau.

The White House says a recent study shows about two-thirds of credit card users say they don’t completely understand their cards’ terms.

Feds Try Out Simpler Credit Card Agreements.(2001, December 11). Retrieved from http://www.detnews.com/article/20111212/BIZ01/112120352/1001/biz/Feds-try-out-simpler-credit-card-agreement