October 2011 - Posts - Dollar Stretcher Guest Bloggers
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October 2011 - Posts

  • Major Credit Card Issuers Report Increase in Delinquencies

    by Bill Hardekopf

    Credit card delinquencies, defined as payments late by at least 30 days, increased slightly for five of the top six card issuers in September. While these increases were relatively small, it broke the trend of declining delinquency rates that the industry had recently experienced. It could be a signal that consumers are again struggling to pay down credit card
    debt and are a higher risk for default in the future.

    The growth in late payments may lead banks to set aside more money to prepare for future losses.

    On a positive note, all six major credit card issuers reported further declines in the default or charge-off rates. Here are the September results for the top six credit card issuers:

    American Express

    The delinquency rate increased to 1.5% in September from 1.4% in August. The charge-off rate was 2.3%, down from 2.7%.

    Capital One

    The delinquency rate increased  to 3.65% in September from 3.43% in August. The charge-offs dropped to 3.9% from 4.1%.

    Bank of America

    The delinquency rate increased to 3.99% in September from 3.96% in August. The charge-off rate dropped to 5.99% from 6.79%.

    Chase

    The delinquency rate increased to 2.53% in September from 2.48% in August. The charge-off rate fell to 4.13% from 4.67%

    Discover

    The delinquency rate increased to 2.5% in September from 2.49% in August. The charge-off rate fell to 3.17% from 3.6%.

    Citi

    The delinquency rate fell to 1.7% in the third quarter from 1.81% in the previous quarter. The charge-off rate fell to 5.58% from 6.21%.

    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.

  • Mobile Payment Market Heats Up with Debut of Google Wallet

    by Bill Hardekopf

    After years of speculation, mobile payments are finally a payment option for some smartphone users with the debut of Google Wallet. Mobile phones provide daily conveniences for Americans, but flashing a phone at the register may not be any easier than swiping a credit card, and it may provide more risk to the consumer.

    "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 available today, 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.

    Google Wallet is the first mobile wallet entry, but it won't be the last. At least three competing digital wallets (from Visa, PayPal, and Isis--a joint venture of AT&T Mobility, T-Mobile, and Verizon Wireless) are planned for launch later this year and in 2012.

    Google Wallet will not replace your regular wallet. You will still need a place for your driver's license and credit cards that are not a part of Google Wallet. Google Wallet plans to expand to include other banks, but if your bank is not one of the partners, your options are limited by Google Wallet.

    Google Wallet is starting with a limited introduction and is currently not available on all mobile phones. If you own a Nexus S 4G phone from Sprint, you can download a Google Wallet app that will allow you to pay for purchases with Citi PayPass-eligible MasterCards or a Google Prepaid Card by tapping the phone on a PayPass terminal. Google Wallet can also work on Visa's payWave System.

    Tips for Using Mobile Payments

    Most of the electronic payment options are tied to credit cards and debit cards, and the same costs will transfer to mobile payments. Purchase protections vary by type of payment and it is up to the consumer to read the fine print and understand the risks of unauthorized activity or errors on their statement.

    • Tie your payments to a credit card. This gives you the best protections no matter where you make your purchase. Credit card purchase protections, caps on liability, and regulations will also apply to a mobile payment backed by a credit card. Under federal law, you are responsible for the first $50 in unauthorized charges after you notify your bank. You also have the right to dispute a charge and the right to chargeback an item.

    • Payments linked to debit cards also have the same purchase protections, and liability as a standard debit card.

    • Avoid billing to prepaid cards. Prepaid cards have more fees than credit and debit cards. They typically cost more and do not have the same purchase protections or caps on liability.

    • Do not bill to gift cards. Gift cards do not offer purchase protections. If you must use a gift card for payment, keep the gift card receipt. If your phone is stolen, contact the merchant immediately to limit your losses.

    • Avoid billing to your telephone account. These accounts offer no protections or caps on liability. Ask your carrier to block third-party charges to your cell phone or your landline. Consumers must pay the wireless company for disputed charges even if a report of a disputed amount was made and the report is pending investigation. If you do bill to a telephone company, place a cap on any third-party charges to your phone bill.

    • If you lose your phone, immediately call your cellular carrier to disable you phone. Call your bank or credit card issuer to block access to your accounts.

    • No matter what payment method you use, look carefully at your statements for any charges that are incorrect and report errors promptly.

    • Send complaints to the Consumer Financial Protection Bureau

    • Stay within your budget. The easier the payment, the easier it is to make impulse purchases and spend more than you intended.

    Ideally, consumers should have strong protections against unauthorized transactions and billing errors with a mobile payment, no matter what form of payment is used. But this is new, and consumers have to know what they are signing up for and the risk. Mobile payments are another easy way to charge more than you can afford. If you can't pay off your balance in full each month, don't increase your credit card balance with mobile payments.

    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.


  • Most Credit Card Issuers Report Further Declines in Defaults & Delinquencies

    by Bill Hardekopf

    Default rates and delinquencies dropped once again in August for most of the major credit card issuers. Chase, Discover, American Express, and Bank of America all reported drops in both important figures in their August regulatory filings.

    Credit cardholders and issuers have both made changes 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 have 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.

    Another decline in charge-offs and late payments shows that issuers and borrowers are still conservative with lending and borrowing, even with interest rates at historic lows. This is creating a healthier lending environment, but borrowing, lending, and spending provide the energy that runs our economy. The economy is stalled without them.

    Charge-offs and late payments peaked in the summer of 2010 and have dropped steadily since then.

    Late payments and default payments are declining at a time when credit card balances are dropping. According to the latest Federal Reserve Consumer Credit Report, revolving credit, which is made up primarily of credit card debt, dropped $3.4 billion to $792.5 billion in July. This represents an annual decline of 5.2%. This follows increases in both May (4.6%) and June (3.9%). Revolving debt decreased for 27 consecutive months between September 2008 and November 2010.

    Here are the default and delinquency rates for the major issuers:

    Discover

    The charge-off rate in August was 3.6 percent of balances on an annualized basis, down from 3.83 percent in July. Late payments were 2.49 percent in August, down from 2.6 percent in July.

    Bank of America

    The charge-off rate in August dropped to 6.79 percent of annualized balances, down from 7.43 percent in July. Late payments fell to 3.96 percent of balances in August, from 4.05 percent the prior month.

    Chase

    Chase charged off 4.67 percent of credit card balances on an annualized basis last month, down from 4.78 percent in July. Late payments were 2.48 percent of balances in August, down from 2.52 percent in July.

    Citi

    The charge-off rate rose to 6.92 percent of balances on an annualized basis in August, up from 6.64 percent in July. Late payments dropped to 3.35 percent in August, from 3.39 percent in July.

    Capital One

    The annualized charge-off rate rose to 4.10 percent in August, up from 3.77 percent in July. Late payments rose for the third straight month to 3.43 percent in August, up from up from 3.37 percent in July.

    American Express

    The annualized charge-off rate fell to 2.7% in August from 2.8% in July. Late payments were 1.4% in August, down from 1.5% in July.

    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.

  • Identity Thieves Find New Ways to Steal Personal Information

    courtesy of The National Foundation for Credit Counseling

    Washington, DC

    Americans go to great lengths to protect against being robbed. We lock our doors, install alarm systems in our homes and cars, and insure our valuables. Many, however, do not pay an equal amount of attention to the crime that impacted more than eight million consumers last year, the crime of identity theft.

    Recognizing that education is the key to prevention, the National Foundation for Credit Counseling (NFCC), National Sheriffs' Association (NSA), and National Association of Triads (NATI) are proud to join forces bringing the fourth national Protect Your Identity Week (PYIW) to communities across the country October 16-22.

    "For the 11th year in a row, identity theft remained the number one most reported complaint to the Federal Trade Commission, further underscoring the need for this campaign," said Gail Cunningham, spokesperson for the NFCC.   "Criminals continually find new ways to rob us of our good name and good credit, making it critical for Americans to stay updated on the latest protection techniques."

    Child identity theft is an example of one of the new ways crooks have found to wreck havoc in peoples lives, sometimes before they are even born. Children's Social Security numbers are 51 times more likely to be stolen than an adult's. Why? The crime goes unnoticed for years, usually not detected until the child attempts to obtain credit, applies for a job, college or government benefits. By then, the damage is done.

    Consider the following statistics from a joint report based on research conducted by AllClear ID and the Carnegie Mellon Cylab:

    • Youngest victim only five months old
    • 54% under the age of 12
    • Largest debt: $725,000
    • Two-year-old in bankruptcy
    • Nine-year-old in debt collections

    The hosts of Protect Your Identity Week welcome AllClear ID as a 2011 sponsor, bringing their significant identity theft protection expertise to consumers, including information specific to child ID theft.

    Thieves are also stealing the personal data left on old cell phones. "People are eager to cast aside their old phone in favor of the newest gadget, often forgetting that the old phone held passwords, account numbers, PIN numbers and other personal information that is a goldmine to a thief," continued Cunningham.

    Since the irresponsible disposal of cell phones provides another avenue for thieves to access personal information, 911 Cell Phone Bank joined the PYIW campaign, making it simple and convenient for consumers to safely rid themselves of unused cell phones at participating events. The phones will be wiped clean by 911 Cell Phone Bank, and then returned to law enforcement officials in communities across the country for distribution free of charge to those most in need, groups such as senior citizens and abuse victims.

    People can have a false sense of security about shredding documents at home, not realizing that a clever thief can piece materials back together, particularly if they have been strip cut. Cintas, a North American AAA NAID and PCI-DSS Compliant document management provider, is once again sponsoring PYIW by offering free shredding at participating events. Consumers can bring their personal documents for shredding and rest assured that they have been properly and permanently destroyed.

    There will be more than 100 Protect Your Identity Week events across America from October 16-22, offering ID theft protection handouts, workshops, speakers, cell phone collection, credit report reviews and shredding. To keep from becoming the next victim of identity theft, visit ProtectYourIDNow.org where you'll find educational resources, steps for victims, and a map to locate the PYIW event closest to you.

    The National Foundation for Credit Counseling (NFCC), founded in 1951, is the nation's largest and longest serving national nonprofit credit counseling organization. The NFCC's mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services. NFCC Members annually help more than three million consumers through close to 800 community-based offices nationwide. For free and affordable confidential advice through a reputable NFCC Member, call (800) 388-2227, (en Espanol (800) 682-9832) or visit NFCC.org. Visit us on Facebook at Facebook.com/NFCCDebtAdvice, on Twitter at Twitter.com/NFCCDebtAdvice, on YouTube at YouTube.com/NFCC09 and our blog at FinancialEducation.NFCC.org.

  • Credit Card Balances Take Significant Decline

    by Bill Hardekopf

    The Federal Reserve Consumer Credit Report released today shows credit card borrowing in July took its first decline in three months.

    Revolving credit, which is made up primarily of credit card debt, dropped $3.4 billion to $792.5 billion in July. This represents an annual decline of 5.2%. This follows increases in both May (4.6%) and June (3.9%).

    Revolving debt decreased for 27 consecutive months between September 2008 and November 2010.

    With the economy in the state of flux, consumers are being understandably conservative in using their credit cards. Even though the Federal Reserve is keeping interest rates low to encourage borrowing and spending, consumers and banks are both taking a cautious approach.

    A few weeks ago, the quarterly Senior Loan Officers Survey reported that only a small percentage of banks have eased their lending standards on credit cards, and banks reported only a moderate increase in consumer demand for credit cards.

    Link to the latest Federal Reserve Consumer Credit statistics here.

    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.

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