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Top 10 Debit and Credit Card Stories of 2011
by Bill Hardekopf
This past year was a very eventful one in the debit and credit card industry. Here is a review of the top ten stories of 2011:
1. Debit Card Interchange Fee
The government regulation of the debit card interchange fee was the most controversial issue of the year. The Durbin Amendment to the Dodd-Frank financial overhaul bill went into effect on October 1. Before the legislation, the interchange fee averaged 44 cents per transaction. Now, the reduced fee is 21 cents plus an additional amount to cover losses from fraud. This cost the banks billions of dollars in lost revenue. The interchange fee was intended to resolve a bitter issue for merchants, but it also ignited unintended consequences for consumers, such as banks dropping rewards for debit card purchases in the spring and proposing to add fees for debit card usage in the fall.
2. Banks Add, Then Rescind, Debit Card Fees
A number of banks introduced a debit card fee of $3 to $5 each month that the debit card was used for a purchase in order to make up for the revenue lost from the reduced interchange fee. But the public rebelled when Bank of America added the $5 fee in September. This fee received condemnations from consumers, Congress, and President Obama. Some consumers even declared a "Bank Transfer Day" on November 5. Banks quickly backed down and dropped the fee at the end of October.
3. Greater Rewards for Credit Card Consumers
After the credit crash in 2008, credit card issuers cut back on the rewards offered to new cardholders. But in 2011, nearly every issuer ramped up the rewards, trying to attract new customers with good or excellent credit scores. Rewards are used to compete for new cardholders, as well as to encourage credit card spending and regular usage.
Some cards now offer very attractive bonuses based on usage. The Chase Freedom card began offering a $200 cash back bonus once a new cardholder spent $500 during the first three months. Capital One Cash was introduced during the year and offers a 50% cash back bonus on all you earn each year, plus an additional $100 bonus for spending $500 on the card during the first 90 days.
Earlier in the year, there were extremely attractive airline rewards. In March, Capital One created a buzz with the heavily promoted "Match My Miles Challenge" where consumers could earn up to 100,000 miles by switching and spending on the Venture Card. Chase followed with a promotion on the British Airways card where cardholders could receive an extra 100,000 miles by becoming a customer and reaching a certain spending level.
4. More Attractive Balance Transfer Offers
Balance transfer offers were also strong throughout the year. Issuers used very attractive offers to lure credit card customers to transfer their existing balance from a competitive card. Nearly every major issuer currently has a card where consumers can receive 0% APR for an extended period of time, including Slate from Chase for 12 months, Capital One Platinum Prestige for 15 months, Discover More for 18 months, and Citi Platinum Select for 21 months.
5. Mobile Payments
Google Wallet debuted in September and mobile payments became a payment option for some smartphone users. Mobile payments allow consumers to make purchases or transfer money with a quick application downloaded to a mobile phone. Even though mobile payment systems are now available, plastic cards and cash won't vanish tomorrow. Consumers and retailers will need convincing and incentives to make the switch. Consumers won't save money by paying with a mobile phone. The same fees and interest rates for consumers and interchange fees for retailers will apply to mobile payments. Retailers are also reluctant to spend the money to buy the equipment necessary to link your cell phone to their cash registers.
6. Defaults and Delinquency Rates Decline
It is a much healthier environment for credit card issuers in 2011. Credit card defaults and delinquencies declined during most months this year. Credit cardholders and issuers both made changes over the past couple years that brought an excessive system of credit card borrowing and lending back under control. Many of the borrowers who could not pay off their debt had already defaulted, while others have diligently paid down their balances and used other forms of payment to avoid the high interest rate penalties. Credit card issuers closed risky accounts, cut credit limits on millions of accounts, and tightened lending standards to cut their risk of defaults and late payments.
7. Credit Card Issuers Drop Some Fees
Some banks tried to polish their tarnished image by dropping some credit card fees. Chase is now offering a Slate card that for a limited time does not charge a 3% fee for balances transferred during the first 30 days that the card is open. Other issuers have eliminated the foreign transaction fee on certain cards. Discover dropped its 2% foreign transaction fee. Chase eliminated its 3% foreign transaction fee on the Sapphire Preferred card, and Citi dropped its 3% fee from the ThankYou Premier and ThankYou Prestige cards. Avoiding the foreign transaction fee is a significant savings for travelers, but also for consumers who makes a purchase from another country or even a purchase that is routed through a foreign bank.
8. Additional Protections for Cardholders
The Federal Reserve Board approved a rule designed to provide additional protections for credit card consumers. The Board's rule amended Regulation Z (Truth in Lending) to clarify prior rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act).
The CARD Act required issuers to consider a consumer's ability to make payments before opening a new credit card account or increasing the credit limit on an existing account. Issuers must consider the consumer's individual income or salary. The application can no longer request "household income" because that term is too vague. As a result, stay-at-home parents now find it much more difficult to be approved for a credit card.
It also clarified that promotional programs, like introductory rates that waive interest charges for a specified period of time, must follow the same rules as promotional programs that apply a reduced rate for a specified period. Offers that waive interest charges during an intro period cannot revoke the waiver and charge interest during the intro period, unless the account becomes more than 60 days delinquent.
9. Consumer Financial Protection Bureau Opens
Credit cardholders now have a place to file a complaint against their credit card issuer. The new Consumer Financial Protection Bureau (CFPB) was created by Congress through the Dodd-Frank Act. While it still does not have a director, it opened in July. It offers consumers webpage just for credit card complaints. During its first three months of operation (July 21 through October 21), the agency received 5,074 complaints. The most common complaints involved billing disputes (13.4%), interest rates (11.0%), and identity theft or fraud (10.8%). Most of the complaints (84%) were sent to credit card issuers for review and response. Issuers reported either full or partial resolution of 74% of the forwarded complaints, and 71 percent of these consumers did not dispute the responses provided.
10. Government Issues Debit Cards for Tax Refunds
The U.S. Treasury started issuing debit cards (MyAccountCard Visa Prepaid Debit Card) instead of paper checks for tax refunds to low income individuals. The Treasury Department is converting to debit cards for several reasons. For the government, they are less costly to mail than checks. For the recipient, they provide a safer, faster and more convenient way to distribute money than checks. Many low income individuals do not have bank accounts and the cashing of these refund checks can be costly. Ideally, these cards reach consumers six weeks earlier than a check. The government hopes the distribution of these cards cuts down on the costly refund anticipation loans than many low income consumers receive.
Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.
Top 10 Tips for Home Economy
by Molly Mitchell
While the big wigs argue about the best way to bring the U.S. out of a financial crisis, there are many things you yourself can be doing for your own home’s prosperity. To help out, we have provided the top ten tips on how to best manage money in and around the home and include everything from saving up to shopping right.
- Plan a Budget – This one seems elementary, but only by knowing where your money comes from and where it’s going can give you an accurate picture of your current financial affairs. Use bank statements, check stubs, and even credit card bills to tally up what you spend and where.
- Pay Down Debt – Interest rates may be low now but are not expected to stay that way. If interest rates do go up, those with the most debt will be hit hard. If you are carrying debt, especially those on credit cards, it is important to pay it down as soon as possible.
- Refinance – Planning to live in your home for at least a few more years? Then consider refinancing it to take advantage of the low interest rates. There are tons of companies who will take your information and give you a quote at no charge.
- Green vs. Green – To save costs on electric bills or to help the planet, many people decide to go green. There are many programs, such as the $1,500 tax credit for new windows, but beware of these. The average cost of replacing windows on the average home can be $10,000 or more. Calculate what you will save and when the windows will pay for themselves before you take a multi-thousand dollar plunge.
- Adjustable Thermostat – Unlike the above, this is one cheap switch that can really save you some money. They start at about $25, can be installed by those with a little DIY experience, and can save you hundreds of dollars a year by heating and cooling your home only when you’re there.
- Shop Around – If you’re reading this, you have an internet connection and a device to read this on. This means that you can instantly shop around for whatever your heart desires in just a click. Utilize the internet to get the best price and other perks such as free shipping and no sales tax if you buy out of state.
- Buy Used – Who says only new products are any good? There are many items where used is just as good as new such as movies, furniture, and many others. Check out sites like eBay or Craigslist as well to get great deals.
- Bulk Up – Staples such as toilet paper, light bulbs, printer paper, and more can all have their prices drastically cut if you buy in bulk. Can’t afford one of those premium club memberships? Then try splitting the cost with a family member or friend.
- Water World – Did you know that wasting water can add up to hundreds in extra costs in just a year? Doing things like putting a brick in the toilet or fixing that dripping faucet can add up big. A drip in your home if let to run for a year can even cost more than what it would cost to have a plumber fix it.
- Save – Whether for a short term emergency fund or retirement, saving is a key cornerstone to any home economics plan. Even in a down market, there are many insured investments that can go up in value and earn you some extra bucks in addition to the bucks you save.
Molly Mitchell is a Economics graduate student and also owns the site Economics Degree. Her site helps students find the right Economics Degree to fit their needs.
Overdraft Fees on the Rise
by Bill Hardekopf
Overdraft fees are again taking a larger bite out of our pocketbooks.
In July 2010, new regulations from the Federal Reserve required consumer consent for overdraft protection for ATM and debit card transactions. These overdraft regulations cost the banks billions of dollars in revenue, but the overdraft fees are increasing once again.
Overdraft revenue fell for six quarters, but have now risen by $700 million in the second quarter of 2011, according to Moebs Services. In addition, the average number of overdrafts per household increased during the same period. Moebs found that 26 percent of consumer checking account holders intentionally overdraw their checking account.
New research by the Pew Charitable Trust found that overdraft fee will cost Americans an estimated $38 billion in 2011.
The Pew Charitable Trust found that banks can still maximize the number of times an account goes negative by processing deposits and withdrawals in an order that reduces the account balance as quickly as possible. They suggested the posting should be neutral.
Overdraft protection is not a necessity and opting out is an easy way for consumers to avoid an expensive fee. If you don't have enough money in your account and you don't have overdraft protection, then the transaction will be declined. That would seem to be a much better alternative than these costly overdraft fees.
Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.
Changing a Behavior
by jd in st louis - Renaissance Woman
No matter what behavior one is trying to change, there is a need to look realistically at the problem and figure out what to do about it to create change. First, identify the problem. Second, determine how to fix it. But, how do we get to the second step?
There is a basic law of physics that goes like this. You are in a box. You want to move the box. No matter how hard you try from inside the box, you can't move it. To move the box, the moving force must be outside the box. From outside the box, one can see where the box needs to move. From outside the box, one can apply leverage, creating the force to move the box.
These basic laws apply to changing anything in our lives, including budget, diet, cleaning, and bad habits.
First, identify the problem, then get yourself outside the box to determine how best to create the change you need. Inform yourself by reading, speaking to experts, researching your options. Moving outside that box mentally also gives some emotional breathing room. The first step is the hardest, which is acknowledging there is a problem. The next step is the one that requires the most work, namely inform yourself, get a plan, move the box.
With the holidays coming up, many of us have more than one problem looming. There are financial considerations. There are time/work/energy issues. There may well be emotional issues related to spending time with extended families.
If finances are a concern, get outside the box and determine, first, exactly how much money you have to spend on gifts and entertaining. Outside of the box experiences include placing a dollar amount that is available to you without going into (or further into) debt. Make a list of those you want/must give gifts to. Then, decide who on that list can be removed. Call or email those people right away with a kind message stating that your holiday priorities have changed and you'll be paring them from your gift list or making a donation in their names rather than giving gifts. (This can cost you as little as you want. Simply list all their names and addresses with your donation. The charity will take care of notification and won't mention how much you gave). For those you absolutely must give a gift (say the children in your home), go for quality rather than quantity. One well chosen gift with two small stocking stuffers will create more joy than a trunkload of "the latest thing." Determine your budget and stick to it. The payoff is ridiculously wonderful!
If entertaining/cleaning/shopping is a challenge for you, start making a list and checking it twice to eliminate the unnecessary. I know I can't afford household help, but I can lower my expectations of just how well manicured the house will look, how expensive the menu will be, and how much help I can reasonably ask of others. Most people are willing to help if they are given specific chores and left alone to do them. If the dust bunnies and Cheerios stuck to the kitchen floor are completely unacceptable, remove them. But, no one will be checking under the tables for dust streaks or opening your curtains to check for clean windows. If they do, point and laugh! Changing your expectations of yourself is one really good way to move the box.
Finally, that great big bugaboo, FAMILY. If you really dread seeing certain family members, then don't see them! Accept no command performances. Be busy. Respect your children, especially the teens and twenty somethings, enough to support their absence from Christmas dinner. If people don't want to be there, why force them? If Grandma or Aunt Tootie is critical, let them know that the young 'uns are where they need to be. That's right - where they NEED to be. Believe me when I tell you that you will teach your children a valuable lesson when you relieve them of the command performances. Family of Origin can be a pain. Cousins don't always love or even tolerate each other. Aunts and Uncles seen but once a year are strangers to toddlers and should be treated as such - kindly and firmly. So, especially if airplane tickets or tanks of gas are involved in seeing extended family, rethink the plans to remain within your budget. Travel is cheaper at other times of the year, and there are fewer demands on our bank accounts and work schedules, fewer travel delays due to inclement weather, and lower expectations from everyone.
The Spirit of the Season is one of love. Love yourself enough to change the things in your life that interfere with your enjoyment of the Season. Choosing (or feeling like you're being forced) to overspend is incompatible with the Spirit of the Season. There is no upside to that.
Do not expect that you can enact all these changes this year! This takes practice. But, you can change how you feel about spending for gifts, cooking for the masses, and working at the office and home to create enjoyment for others. Expect some of this for yourself. Start now with identifying those things that interfere with your serenity and joy. Write them down. Get a plan. Understand that you can't implement all the changes at once. But, change ONE thing this year, this season. Make that your highest priority. Don't Overspend. Step outside the box to move it, a little at a time.
Everyone is smart about something! That's why we have The Dollar Stretcher Guest Blog. If you have a story that could help save time or money, please send it to MyStory@Stretcher.com
Jobless Execs: It’s Time to Dump the Old School
by Colleen Aylward
The nation’s unemployment rate may be inching downward, but the out-of-work figures have remained in the 9.0 to 9.2 percent range since April 2011, according to Bureau of Labor statistics.
An estimated 32,000 job seekers found work in October, but that still leaves 13.9 million reported unemployed, which means a lot of people are competing for the same job.
So how do you stand out in that crowd?
“It used to be that executives could network their way onto the CEO’s schedule, maybe on the golf course or a chance meeting at lunch or a ball game,” says Colleen Aylward, a recruitment strategy expert and author of, From Bedlam to Boardroom: How to Get a Derailed Executive Career Back on Track! (http://devonjames.net/the-book/). ”It’s now up to you to gather your data, polish it up and position it where people will find you — and that’s one of the biggest shocks in the executive job seeker’s world right now.”
It’s a message that unemployed execs in their later years may not want to hear, but it’s one they need to get their collective arms around as the economy tries to rebound. The old-school train has left the station — permanently — and if 40- and 50-something prospects want to compete for top-flight executive positions it’ll mean breaking old habits and exiting their comfort zones.
Two words: digital brand.
Aylward says that it’s time to become an authority on-line and to create a virtual network of business connections so that you can easily be found.
“Just when they thought their golden years entitled them to being 'served' by recruiters, members of that older generation now have to do homework and market themselves,” says Aylward, who interviewed thousands of jobless executives over 20 years.“They don’t want to hear it, or believe it, but it’s reality.”
According to surveys, 89 percent of employers use a form of social media to identify job candidates, with LinkedIn, Facebook and Twitter the most popular. LinkedIn, with its more than 135 million members, dominates the competition, with 86 percent usage compared to just 50 percent for Facebook and 45 percent for Twitter.
Sounds like a good place to start.
After embracing social media (even building a personal website), Aylward has these tips:
- Streamline your strengths with specific examples. It’s not the interviewer’s job to figure out what your strengths might be; it’s the candidate’s job. The days of clever cover letters opening doors are gone. Those resumes and on-line profiles better be stronger than ever and packed with data and specific accomplishments.
- Don’t waste time with external executive recruiters. They don’t find jobs for people. You need to get in front of the internal corporate recruiters who are searching for you online. So help them do their job by researching companies online yourself, as well as locating jobs yourself, introducing yourself to a prospective employer and conversing directly with hiring managers online.
- It’s all about them, not you. Get out of the mindset that matching yourself for a job or interviewing for a job is about you. It’s all about what you can do for them. That means defining your strengths and determining specific areas where you can solve their business problems. And be prepared to demonstrate that you have kept up with technology, industry changes, and how the economy has affected them.
"Embrace change,” Aylward says. “You are still very valuable and worth money for a long time, but you need to make yourself visible and viable to those who need your expertise.”
Colleen Aylward has led the executive search firm Devon James Associates, Inc. for 19 years and is founder of Recruitment, Inc., a spinoff software product company in the Human Resources & Recruitment market. She currently resides in Bellevue, Wash.
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