Why banks are boosting credit card interest rates

Tommy Newsom was shocked when his bank nearly doubled his credit card interest rate this year, to 27%, for no apparent reason. A customer rep told him the law allowed the bank to do so, and that was all the justification it needed.

"I never missed a payment," says Newsom, 63, of Mesquite, Texas, who owes about $5,000 on the card. "The bank is just looking for a reason to maximize profits."

In recent years, banks have sharply raised interest rates and penalty fees on credit cards. As the economy tanks and banks' mortgage-related losses balloon, some banks are stepping up such increases to boost revenue. Bearing the brunt are consumers for whom a jump in rates and fees can make it tougher to pay their bills at a time when household budgets already are being stretched.

A key driver behind this trend: securitization. From 2003 to 2007, seven of the largest issuers of credit cards packaged an increasing amount of card debt into securities and sold them off to investors, just as banks did with mortgages, a USA TODAY review of banking records found.

Selling off credit card debt has given banks a powerful incentive to raise card fees and penalties, according to interviews with dozens of industry analysts, academics and investment specialists.

Here's why: When banks package and sell card debt, they pass along to investors some of the risk the debt will go bad. Yet, banks often get to pocket much of the profit from rate and fee increases on those accounts. Imposing higher fees on more accounts — without a comparable rise in risk — lets banks raise revenue and keep profits up, at customers' expense.

Securitization has been a "major impetus" for banks to expand penalty fees and rates in recent years, says Adam Levitin, a Georgetown University law professor and card expert. Banks "have little to lose if they squeeze too hard (if consumers default), but a lot to gain if they can extract additional payments" from card users, he says.

Banks deny any link between securitization and rising penalties. They say fees are rising because of superior data-tracking tools that allow banks to draw precise profiles of card users. Banks can price debt fairly, officials argue, with riskier borrowers paying more, as they should.

"Securitization is a method of funding credit card loans," says James Chessen, chief economist at the American Bankers Association. "Penalty fees and rates are entirely separate and completely avoidable."

As the debate unfolds about whether — and how much — securitization drove up penalties, analysts are bracing for an acceleration in credit card losses. Already, delinquencies are at their highest point in six years. Defaults, triggered when banks give up on collecting bad loans, are rising rapidly, too.

By the end of 2009, banks are likely to write off a record amount — up to $96 billion, or about 10% — of all credit card debt, says Innovest Strategic Value Advisors, a research firm that was among the first to predict the mortgage meltdown. The credit card market is a fraction of the size of the mortgage world, but its collapse could threaten some issuers' solvency and make it harder for others to absorb financial shocks, says Gregory Larkin, a senior analyst at Innovest.

"Mortgages were simply the first storm to make landfall," Larkin says. "Credit cards are next."

Experts worry that the $700 billion authorized by Congress to help stabilize financial markets will do little to solve the underlying problems.

"Securitization is an important economic tool," says Rep. Carolyn Maloney, D-N.Y. "But when we saw the subprime (mortgage) meltdown occur, we started really looking at credit cards as the next crisis. We have to crack down on the abuses."

Several bills in Congress, including Maloney's Credit Cardholders' Bill of Rights, seek to clamp down on hair-trigger fee and rate increases. The Federal Reserve has proposed limiting rate increases on existing debt and curtailing excessive fees for borrowers with marred credit.

Meanwhile, amid the slowdown of the securitization markets, Sheila Bair, chairman of the Federal Deposit Insurance Corp., wants more restrictions on mortgage- and credit-card-backed securities. "We're finding in retrospect that being able to securitize debt … weakens underwriting discipline," Bair says. "Whether it's credit cards or mortgages, this dynamic needs to be dealt with."

A proposal by the Financial Accounting Standards Board could lead banks to keep more card debt on their balance sheets, and hold more capital in case those loans sour. Banks' inadequate capital levels have prolonged the economic crisis, analysts say.

source : http://www.usatoday.com

Best Credit Cards For The Buck

For years, credit card offers arrived in consumers' mailboxes with greater frequency and consistency than those AOL CD-ROMs.

The offers, many claiming pre-approval, promised low-interest rates, balance transfers and reward programs for everything from gifts to airline miles. American consumers signed up in droves. According to a June 2008 Consumer Reports story, 85% of U.S. households are signed up for at least one rewards program.

Today, however, with the credit crunch and slumping economy, low interest rates, perks and big rewards could soon be a thing of the past. Although the credit card system has, until now, been relatively insulated from the financial meltdown, cardholders are finally feeling the belt tighten.

source : http://www.forbes.com

Layaway: The New Credit Card?

Remember layaways?

Neither do we. Mostly because their biggest boom was during the Great Depression. But thanks to the credit crunch, the layaway has been resurrected, reports today’s WSJ.

A layaway lets a customer put a purchase aside without having to pay for it in full upfront. Dying for that Robopanda but not ready to shell out $199.99 to Kmart right now? No problem. Kmart will hold onto one for you! But there is a catch:

Layaway plans aren’t free — most stores charge a fee for setting aside the merchandise, and ask for a down payment. Kmart requires customers to pay a $5 service fee and a $10 cancellation fee upfront, or put down 10% of the item’s cost, whichever is greater. Customers must make biweekly payments over eight weeks to pay the balance. In case of default, the item goes back into stock and the customer receives a refund, minus the $15.

Some other companies, like TJ Maxx, Marshalls and Burlington Coat Factory, are offering similar layaway plans this season as well. (Wal-Mart axed their layaway plan in 2006.) Sites like eLayaway.com have sprung up, luring consumers with iPod Touches for “as low as $42.23 a month.”

In a perfect world, people would only spend money they actually have on holiday goods. But we’re realists and understand the appeal of the layaway. Compared to the typically sky-high interest rates on credit cards, this might actually be a better alternative if you’re in a pinch.

Keep in mind that the store — not a bank or credit card issuer — sets the rules here. If you miss a payment, you still don’t have the item (since they’re laying it away until you pay in full), and you won’t get all of your money back. They’re not going to negotiate a payment plan with you like a credit card company might. (Not that those guys have been super-flexible lately, either.)

Some stores that offer layaways allow you to charge the payments to your credit card, which doesn’t make much sense: Not only are you racking up layaway fees, but you’re also incurring potentially high interest rates from your credit card. Not a good move.

Before you sign up to lay away, ask yourself a few questions: Do you really need that robotic bear (or whatever)? Can you hold off and pay in full later? What will those payments will look like once the holiday hullabaloo has died down?

source : http://blogs.wsj.com

Credit card? Look at your salary first!

With rising salaries, banks and credit card companies are most likely to increase you credit limit. The easy availability of credit, especially on credit cards, has led to a situation, where most have got used to swiping cards.

However, we always tend to forget that the idea of having a credit line does not mean that you need to use it. Also, it is the wrong way to look at credit just because there is some money available for use. You have to pay it back sometime, and with lots of interest. Delaying repayment only increases the burden to a great extent.

Most banks charge over 30 per cent interest on the outstanding amount, while some charge over 45 per cent a year. In other words, for an outstanding of Rs 1 lakh (Rs 100,000), you could be coughing up anywhere between Rs 30,000 and Rs 45,000.

No wonder, financial planners would say that even before taking a card, it is better that you act as your own policeman. Be cautious about the credit limit being offered. For instance, you might be eligible for Rs 1-lakh limit. Ask yourself the important question: Do I really need it?

While the availability of a higher sum is a good sign, it is not necessary that it should be taken up just because it is there. Similarly, there has to be a constant monitoring of the credit that is being used too so that the potential liability does not extend beyond a certain figure.

In this sense, it is necessary for each individual to fix the amount that one can afford to use on one's credit card. Your total credit, including other loans, should not go beyond 30-35 per cent of your income. This will ensure that there is not too much pressure on your finances and there is also some control over the payments.

The overall credit that you need depends, besides the income, solely on your spending habits. If you are a "cash-first" person, who incurs most of expenses in cash, the requirement is of a smaller credit limit.

On the other hand, if you want to provide some additional amount for a buffer for, say, an emergency hospital expense, then a slightly higher limit will be essential for you.

If you like the feel of card swiping the machine so much that all expenses are incurred with it, then you do need a limit that is considerably higher. But whatever be the situation, it is essential that each individual takes a careful look at one's own position and then decides the minimum amount of credit limit that is required on one's credit cards.

But once you have the limit, make efforts right from the time of selection of credit cards to the usage to make sure that you do not get into a debt trap.

Also, if you have a number of cards, you need to look at the situation in its entirety and not piecemeal because the general tendency is to look at the limit spent on one card and say, "Oh, I am not spending on the other, which is already stretched, or I am using one card properly."

Like the entire credit limit across various cards in your total credit available, the total expenditure also has to be across all the cards. And it is a common situation, where one insulates one card from the other for convenience, when it comes to credit usage.

Of course, the final dictum, making payments as much as possible and regularly before the due date ensures lower interest cost and, more importantly, lesser pressure on funds and no headache in the long run.

Disciplined spending is the best way to ensure that there is no overspending on the cards. And that makes life simpler.

source : http://inhome.rediff.com/money/2008/oct/20card.htm

A Christmas without credit cards? What lower limits mean this holiday shopping season.

Wall Street's problems have captured the attention of Congress, the White House and the media. But on the country's Main Streets, worried workers, struggling small business owners and cash-strapped families are wondering if anyone is paying attention to them. A look at how Americans are coping with the economic crisis.

Here's a scenario that will be more common this holiday season: You fill your arms with purchases and head to the register, where you've been told you'll receive a 20 percent discount by applying for and using the store's credit card. That will help, because you're already nearing your MasterCard limit. But a moment later, the teenage salesgirl says, "Sorry, you've been denied." You slink out, gifts left at the counter, angry and a little bit ashamed, too. Didn't the store encourage you to ask for the card?

That's just one of many ways that this is going to be a different kind of Christmas, as retailers' biggest season collides with newly tightened standards from credit-card companies. Banks and other card issuers have been ratcheting down consumer credit limits, raising interest rates, closing down accounts completely and getting tougher about whom they'll give their cards to in the first place. "Every issuer is looking at this," says John Ulzheimer, president of consumer education for credit.com. "It's one of the top two issues we are hearing about from consumers, and that is a significant change." Since few card issuers are willing to disclose their decisions, it's unclear exactly how many Americans will be affected this holiday season.

At the same time, retailers are trying to fight back by pushing their own cards and starting Christmas sales and displays early. Customers can be expected to use less credit and more cash, propelling them to local stores and away from online merchants. Analyst Dana Telsey, of the equity research and consulting firm the Telsey Advisory Group, expects an even slower holiday season than the anemic one that's been projected. The National Retail Federation had been predicting a 2.2 percent increase in sales this holiday season, the slowest growth in six years, and that was before October's credit meltdown. Sales of big-ticket items like flat-screen TVs could be particularly weak, because the usual "one year, no payments, no interest" offers that often accompany those sales won't be as plentiful.

source : http://www.newsweek.com/id/164052

Bailout has yet to ease fears on Wall Street

WASHINGTON – Why isn't it working?

The Federal Reserve is pumping more than more than $800 billion in loans and investments into banks and corporations. In a move coordinated with other central banks around the world Wednesday, the Fed cut interest rates.

The Treasury has $700 billion to buy mortgage-backed securities, with the hope of rebuilding a market for these complex debt instruments. Treasury officials are still saddling up, but the fact that Congress approved the bailout and President Bush signed it has not restored confidence to stop the panic.

Stocks are still going down. More dangerously, banks are still refusing to lend to each other.

So why?

In part, economists say, because we still don't have a clear grasp of the extent of the problem. There are mortgage foreclosures still to come, credit card debts to charge off and many questions still unanswered about the value of the complex derivatives that came to underlie the financial system in the last decade.

Patience, counsels Liz Ann Sonders, chief investment strategist with Charles Schwab Corp. Things haven't calmed down in part because the financial crisis is still spreading.

"It's almost like, we're coming up with solutions, but while the global domino effect is still in its crescendo phase," Ms. Sonders said.

Some economists say a fundamental problem is that the financial community can't tell the difference between a company with a liquidity problem that's short a few bucks and one that's insolvent, or wiped out. Loans can handle the first problem. Capital obtained from selling all or part of the company is required to fix a solvency problem.

"When a bank gets in trouble, it seems like it's always a liquidity issue, but what drives the liquidity issue is the solvency concern: 'Am I going to get my money back?' " said finance professor Frank Anderson of the University of Texas at Dallas.

In this uncertainty, many older investors have panicked and are selling their stocks to try to save what they can of their retirement nest eggs.

"Millions of people relying on 401(k)s for their retirement, they are just freaking out now," said Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas. "The brokers call it GMO – 'get me out!' "

Finance professor Dr. Anderson noted that the Dow Jones Industrials Average hit its all-time high of 14,164 points one year ago, and has since fallen more than 5,000 points.

News Source : http://www.dallasnews.com/

Credit can't cover our cost of living anymore

WASHINGTON – You know what's coming.
Auto loans, student loans, mortgages and home equity loans – all are tough to get now and will be harder to come by for years. Lenders are expected to ration credit rather than raise interest rates. Risk is out. Cash is king.

Household debt has soared from about 45 percent of GDP in 1985 to more than 100 percent today, or $14.5 trillion – more than the total value of all the goods and services produced in the economy in the last year.

Clichés about inebriated consumers are rife: The party's over. Hangover. A return to sobriety.

There is another perspective.

"The core driver of the mortgage collapse is a 10-year trend in which consumers have seen their real wages decline, their debts increase and their savings depleted," said Greg Larkin, a consumer spending analyst with Innovest Strategic Value Advisors in New York.

"This, combined with unprecedented leverage, liquidity and fraud, is what has got us to where we are," he said.

Keeping up via credit

In other words, while income stagnated, consumers used credit to keep up with the rising cost of living. Between 2000 and 2005, the U.S. Census Bureau found that household income declined in the Dallas-Fort Worth area. It's nosed up a bit since, but not by much.

Lenders were delighted. They had plenty of money to lend and lots of investors willing to share the risk. Some of the business models for credit card companies actually relied on loan delinquencies with their late-payment penalties to boost profit, Mr. Larkin said.

As with subprime mortgages, consumers with poor credit histories were lured to credit cards with cheap interest rates and loads of fine print that ballooned rates and spanked anyone going over spending limits.

When Washington Mutual Inc., the nation's largest savings and loan, was seized by the government last month and sold to J.P. Morgan Chase, 48 percent of its credit card holders were considered subprime borrowers, Mr. Larkin said.

News Source : http://www.dallasnews.com/

Retailers Report Credit Card Use In Decline

FORT WORTH, Texas --
With consumer confidence on the decline and many shoppers tightening their belts, retailers are surprised to report how many people are paying for purchases.

For six years, Norma Talbott has owned and operated a small Frisco jewelry store. In a tough economy she said her sales have been surprisingly stable with the exception of one major change, people are now paying with cash.

For some, life without credit cards has been a way of life for a while. For others, it's a changing mindset brought on by Wall Street woes.


Visa and MasterCard both reported growth in their last quarterly earning statements, but Visa said that growth was due in large part to its debit card business as consumers shift away from traditional credit card spending.

Mike Davis with the Cox School of Business said if the trend sticks it's a good sign that consumers are getting wiser.

"It certainly means people are being more careful, that they're feeling stressed about this economy and they ought to," said Davis.

The thing Davis said would be really concerning is if the economy continues to head south and credit card spending goes up.

Davis said that is an indicator people are in an emergency situation and credit is the only source of money available.

News Source : http://www.nbc5i.com/

Four in the net for Rs 1cr credit card fraud

NEW DELHI: Though just a Class XII pass out, 32-year-old Sajid Ahmed Choudhary is an expert in computers and has allegedly cheated several banks of nearly one crore. The special staff of the south district police arrested Choudhary and his three step-brothers for the crime on Thursday.

According to the police, the gang had set up a fake travel agency called Diamond Tours and Travels. Choudhary used to approach different banks and rent out card swiping machines or EDCs from the bank. Using these machines, they used to allegedly swipe stolen credit cards to transfer money into their account. The police picked them suspecting to be terrorist, however, later found their involvement in a cheating case.

While investigating their links, the police learnt they had duped Citibank, ICICI bank and DCB bank. The first complaint was received from Citibank manager Harminder Mann in Gurgaon.

It was alleged that two persons by the names of - Vishal Verma and Anil Verma - had approached the bank. The duo opened a current account no 0005724284 in the name of Diamond Tours and Travels. Vishal Verma was shown as the proprietor of the firm, which according to the duo was functioning out of G-5, Krishna Complex, main road Nithari, Sector-31, in Noida.

The two had, reportedly, given an address in Ashram as their residence address. They deposited Rs three lakhs and requested for one EDC machine. As proof of residence, Vishal Verma submitted a copy of Passport No. E-0472233 which carried an Ashram address.

‘‘Over the next few months, it was found that several credit cards of different banks were swiped from this machine and money worth Rs 71.5 was credited into the travel agency’s account. Interestingly, all the swiped cards were issued by foreign banks to foreign customers only,’’ said DCP (south) HGS Dhaliwal. Citibank woke up to the fraud only when several of its customers started disputing the charges debited to their credit card accounts and the bank started having disputes with the card issuing banks. ‘‘During the investigation, we found Vishal Verma was actually Sajid Ahmed Choudhary of Mumbai. On Thursday, a team led by inspector Vijay Singh of the special staff conducted a raid and arrested Choudhary along with his three associates,’’ added Dhaliwal.

An expert at hacking, Choudhary revealed he had studied only up to Class XII. While working on the internet, he changes the Internet Protocol address as well as browsers to hide his presence and location. He also, allegedly, creates viruses and uses them to hack the administrative control of the website. His gang had been operating for the last four years. Initially settled in Mumbai, he started placement jobs for Reliance Infocom. He was arrested in 2005 when he hacked a Reliance website. While in jail, he met another fraudster, Kamal Kumar, who advised him on online hacking. After getting bail in the year 2005, he again started cheating.

He was arrested by the Mumbai ATS in January this year on grounds of suspicion and later, was found to be involved in a cheating case. He was released on bail in March. Since then, he shifted base to Delhi. Here, Kamal Kumar, allegedly, had already been operating a fake travel agency using the fake identity of Anil Verma since January.

The other three accused - Shabbir Ahmed, Sabir Ahmed and Shahnawaj - are his step-brothers. The accused were arrested from Madanpur Khaddar on Thursday. Among other things, Rs 7.5 lakhs, 28 credit cards of different banks and three card swiping machines were seized. Meanwhile, a police remand for eight days has been sought for the accused.

News Source : http://timesofindia.indiatimes.com/

You may soon use your mobile phone as credit, debit card

NEW DELHI: In a development that could completely liberalise mobile commerce, the department of telecommunication (DoT) will soon write to the Reserve Bank of India (RBI) seeking guidance on linking telephone networks with banking services.

While the RBI recently announced certain guidelines for mobile banking in India, it only provides for a few basic banking services which can be undertaken through mobile phones. The new DoT move will allow consumers to virtually use mobile phone as a debit or credit card.

Sources told SundayET that the ministry would seek RBI's consultation to provide full-fledged mobile banking services to the customers, in line with discussion held between the 13th Finance Commission team and DoT officials on September 18, 2008. According to a senior DoT official, the ministry has so far not taken any initiative on linking telephone networks with banking services, but is keen on it as it will generate revenues, in addition to giving more value to telephone customers. "These services can increase the share of value-added services from the existing 7-8% of total revenues from the sector to almost about 25% which is the case in the developed countries," DoT said to the Commission's team. SundayET has a copy of the discussion paper prepared by DoT.

Explaining how the new initiative would help Indian consumers, Romal Shetty, director at KPMG India, said it would change the entire face of banking in the country. "So far, consumers can make only a few basic transactions through the mobile, but this will mean using your mobile as your credit or debit card. All you have to do is to send a message to make a payment," he said.

Mobile commerce in India has been limited primarily to basic banking transactions, purchase of travel tickets and payment of some utility bills, checking your account balance and last few transactions. Sanjiv Mittal, vice-chairman, Bharti Telesoft, that provides mobile banking facility to the customers in collaboration with Barclays Bank feels that both, banking and telecom industry, will have to come together to make mobile commerce a success in India. "There are certain laws to be considered regarding money remittances. Considering the IT security condition, coming together of both is a good sign," he said.

The DoT has informed the Finance Commission's team that revenues from auction of spectrum for 3G and BWA services could go up to Rs 30,000 cr. The 13th Finance Commission asked the DoT to give the revenue projection from the telecom sector between 2010 and 2015.

News Source : http://economictimes.indiatimes.com/

Credit Card Companies Reducing Some Card Limits

You may start feeling the effects of the credit crisis, if you haven’t already. Many families are already relying on credit cards to pay their basic expenses, such as gas, groceries, bills. Now some banks and credit card companies are cutting back on the credit and loans they’re offering. You may soon find you have less credit available or can’t get a loan you need.

Counting on your credit card to make a major purchase? Check your credit limit first. Visa, Mastercard, and American Express are all lowering credit limits on some card holders to reduce the risk of customers not making payments. The New York TImes reports limit cuts are being placed on customers with heavy debt, who live in areas with high foreclosure rates, or work in troubled industries.

Certified Financial Planner Rick Van Der Noord says that could, and should, force families to change the way they spend. Said Van Der Noord, “If you have to use credit for your living expenses, it wasn’t smart and it’s not smart, but it might not even be an option at this point.”

But lowering your limit can reduce your credit score. It forces your debt to credit ratio to go down. That could mean paying higher interest rates on your other credit cards or a car or home loan. Not to mention if you overspend your new credit limit, you’ll be hit with fees.

But Stuart says students won’t see much if any change in Federal or State school loans. Said Stuart, “Most of our loans go through the South Carolina Student Loan Authority and their funding is fine.”

Stuart says Federal loans are still available but schools may have to find different banks to back those that are not backed by the government.

If you’re having trouble getting a student loan, Stuart says go back to your financial aid office. Many schools are now offering loans they fund themselves. You may also try using a co-signer for a private loan.

How can you fix your credit score if your credit limit has been lowered? Try asking the lender to raise it again. If you have a good payment history, point that out. Ask other cards for an increase, open a new account, or pay down the balance.

News Source : http://www.wspa.com/

Credit card nightmares prompt long-awaited crackdown

WASHINGTON — What prompted a slew of new federal proposals to combat abusive practices in the credit card industry depends on whom you talk to in Washington.

Some say the new recommendations by the Federal Reserve Board were the result of congressional pressure and public outcry.

Others say that regulators, stung by their own inaction in the subprime mortgage meltdown, feared a similar mistake would cause the growing credit crisis to snowball.

While there's disagreement about what sparked the move, even the most jaded political observers now agree that, after years of complaints, relief is finally on the way for cardholders who feel victimized by their plastic.

"I've not seen anything like this out of the Federal Reserve ever," said Travis Plunkett, the legislative director of the Consumer Federation of America. "These problems have been coming up for a decade, and they've been asleep at the switch. But that's changing. It's a new world."

And not a moment too soon for such folks as Kathi Parlier of Newnan, Ga., whose credit card interest rate jumped from about 7 percent to 32 percent in 2004 after a property foreclosure damaged her credit rating. Parlier, 42, said she'd never made a late payment on the card.

"I could deal with it going to 12 to 15 percent, but considering I was never late, they never should have gone up on it like that," Parlier said. "They shouldn't be able to do that."

New rules proposed by the Fed wouldn't stop rate increases like Parlier's, which are known as "universal defaults." But they would prohibit card companies from applying the higher rate to the existing card balance — unless the cardholder was more than 30 days late on his or her bill.

That provision alone would have saved Parlier thousands of dollars. Her card balance was nearly $7,000 when the rate hike kicked in. The higher interest rate — now about 29 percent — means only a small portion of her payments go toward her debt.

"I paid $160 last month and $108 of that was finance charges, so I've only got $52 going to principal," Parlier said. "I always pay a little more than the minimum, otherwise I would never get it paid off."

The Fed's new recommendations were drafted in concert with the Office of Thrift Supervision and the National Credit Union Administration.

News Source : http://www.idahostatesman.com/

UPD seeks help in stolen credit card case

UTICA, N.Y. -- Utica Police are asking for your help in a grand larceny case. They are looking to identify three people who used stolen credit cards at different stores on December 9th of last year.

The first is a female wearing a tan coat with light brown or blond hair that used a stolen card at a Wal-Mart. The second person is described as a female wearing a black coat with dark hair. She used the cards at a Walgreen’s. They are also looking for a third person, a man.

Anyone with information about these people is asked to contact the Criminal Investigations Division by calling (315) 223-3510 or logging on to www.UticaPD.com.

News Source : http://news10now.com/

TransUnion.com Quarterly Credit Card Analysis Reveals That National Credit Card Debt Moves Up Again While Delinquency Rate Continues to Creep Downward

CHICAGO, Sept 16, 2008 /PRNewswire via COMTEX/ -- TransUnion.com released today the results of its analysis of trends in the credit card lending industry for the second quarter of 2008. The report is part of an ongoing series of quarterly consumer lending sector analyses focusing on credit card, auto loan and mortgage data that may be found on TransUnion's Web site.

Statistics

The recent first-quarter drop in average credit card debt was temporary, as data from second quarter 2008 shows a slight increase across the board geographically. National credit card debt per credit card borrower increased 2.63 percent to $1,717 from the previous quarter's $1,673, and 8.6 percent compared to the second quarter of 2007 ($1,581). The highest state average card debt per credit card borrower was in Alaska at $2,494, followed by Tennessee at $2,109 and Alabama at $2,015. The lowest average credit card debt per credit card borrower was found in Iowa ($1,281), followed by North Dakota ($1,318) and South Dakota ($1,388).

The steepest increases in average credit card debt over the previous quarter occurred in the District of Columbia (6.62 percent), Alaska (4.84 percent) and Tennessee (4.75 percent). Alabama experienced the smallest increase in its average credit card debt (0.49 percent), followed by North Carolina (0.73 percent) and West Virginia (0.82 percent).

On a positive note, the national credit card delinquency incidence rate (the ratio of borrowers 90 or more days past due) continued to decline for the second quarter in a row.

Nationally, the ratio of credit card borrowers delinquent on one or more of their credit cards declined to 1.04 percent in the second quarter of 2008, down 12.6 percent over the previous quarter. However, on a year-over-year basis the national delinquency incidence rate has risen 14.3 percent from 0.91 percent in the second quarter of 2007. Incidence of delinquency was highest in Nevada (1.72 percent), followed closely by Florida (1.34 percent) and Mississippi (1.30 percent). The lowest credit card delinquency incidence rates were found in North Dakota (0.59 percent), Vermont (0.68 percent) and Utah (0.70 percent). Quarter-over-quarter delinquency incidence rates dropped across the board. Nevada experienced the smallest drop in delinquency (-1.15 percent), while the District of Columbia's delinquency incidence rate dropped the most (-28.2 percent) from the previous quarter.

News Source : http://www.marketwatch.com/

NJ bill restrict campus credit card solicitations

TRENTON, N.J. - A proposal that would set limits on credit card solicitations on New Jersey college campuses has advanced.

The bill's sponsors said the measure would help protect the credit ratings of students and their parents by allowing the Division of Consumer Affairs to regulate how credit card companies solicit applications on campuses.

"When used properly, credit cards can be a great financial tool," said the bill co-sponsor, Assemblywoman Sandra Love, D-Camden. "Unfortunately, many college students do not understand how credit works and wind up getting themselves and their parents into financial trouble by spending more than they can possibly pay."

The bill would require credit card companies to register on campus before soliciting students. It would also mandate that they provide education on the responsible use of credit before issuing cards to students.

The bill would bar credit card companies from buying lists of students' names and addresses and from offering gifts in exchange for opening an account.

It also would bar companies from taking action against parents of students who fail to pay, unless the parent previously agreed to be responsible for the debt.

The legislative proposal cites a four-year-old study conducted by the national student loan company, Nellie Mae, which found more than half of the college students surveyed had four or more credit cards with an average total debt of $2,864.

"Casual, uninformed use of credit can have long-lasting financial implications," said co-sponsor Pam Lampitt, D-Camden. "Requiring credit card companies to ensure that college students understand how credit works before they apply for a credit card will go a long way toward making New Jersey undergraduates more savvy consumers."

Though some lawmakers expressed concern about how the educational component of the bill would be delivered _ some asked whether could credit card solicitors would satisfy the requirement by giving students literature to take home and read, for example _ the measure advanced by a vote of 3-1 with 1 abstention.

It now heads to the Assembly speaker for possible consideration by the entire Assembly. A similar bill awaits a hearing in the Senate Commerce Committee.

News Source : http://www.newsday.com/

Credit card forgery racket busted

KOLKATA: City police busted an inter-state credit card forgery racket on Wednesday and nabbed two people who supplied card details to racketeers. However, the kingpin managed to evade the police net.

The forgery came to light when two customers of a private bank lodged a complaint with bank officials that fraudulent transactions worth Rs 1.18 lakh had been made on their cards. One of the complainant is the branch manager of the same bank. The bank lodged a complaint with Alipore police station on Wednesday afternoon with transaction details.

During the probe, police found that the transactions were made after August 29 on the internet. Though the illegal transactions were made from different places - complainant Sanjay Malhotra's card was used in Pune, while Sandeep Chakraborti's was used in New Delhi - the statements showed certain similarities.

Both cards were used to purchase materials from the same company (a telecom major ). Also, the complainants had used their cards last at an Alipore shopping mall.

Investigating officers Prithwiraj Bhattacharya and V Mukherjee of Alipore police found that during the last legal transactions on both cards, Mritunjay Mishra was the mall staff, who had swiped both cards.

Police picked up Mishra, a business management student . During interrogation he broke down and admitted that he used to copy the details of the credit cards. "For the last two months he had copied detail like name, card number and validity of many cards," said an officer.

Police said Mishra supplied the details to Amit Mishra, a cellphone mechanic at Fancy Market in Kidderpore. Amit was nabbed later in the day. Sleuths said later that both Amit and Mritunjay were minor players in the racket.

Amit told police that a few months back he met a youth named Amren, who claimed to be a resident of Delhi. He offered to pay Amit Rs 500 for the details of each card. "Amren would verify the authenticity of each card before paying Amit," said an officer. Police are looking for Amren. They also seized the details of six more cards from Amit.

In another fraud case, a retired government employee, Nalini Mohanti, was arrested for duping may people to the tune of Rs 30 lakh. Officers at Gariahat police station received two complaints against Mohanti and his kin. Mohanti, his daughter Sutapa and son-in-law Sandeep allegedly lured people to invest money in stocks with the assurance of double returns.

When the investors didn't get returns, they lodged complaints . Mohanti's daughter an son-in-law are absconding.

News Source : http://timesofindia.indiatimes.com/Kolkata_/Credit_card_forgery_racket_busted_/articleshow/3446476.cms

American Express tops credit card satisfaction poll

NEW YORK (Reuters) - American Express Co ranked highest in consumer satisfaction among U.S. credit card issuers for the second straight year, according to a J.D. Power and Associates poll released on Wednesday, which cited its benefit and reward programs.

American Express, the fourth-largest U.S. credit card issuer, was followed in the rankings by Discover Financial Services.

Both American Express and Discover improved their performance from last year's survey and were the only two companies whose scores topped the industry average in the poll.

JPMorgan Chase & Co, Citigroup Inc and Bank of America Corp appeared in the fourth, seventh and ninth positions in the rankings, respectively, according to J.D. Power, a unit of McGraw-Hill Cos.

The poll, conducted in April and May, received responses from 7,665 credit card users.

source : http://www.reuters.com

[back to MSN Money]

Discount retailer Target Corp. will curb store expansion and tighten credit-card terms after reporting fiscal-second-quarter net income fell 7.6% because of credit-card write-offs and weak sales.

The Minneapolis store chain said profit from credit-card operations fell sharply for the fiscal quarter ended Aug. 2 as a result of write-offs and the sale earlier this year of a half-interest in its credit-card receivables.

The operation, which had been delivering strong profit, reported income tumbled 65% to $74 million, from $213 million a year earlier. In May, Target sold a half-interest in its card receivables to J.P. Morgan Chase & Co. for $3.6 billion.

The company said it is slowing the growth of its credit-card portfolio and revising credit terms to counter higher bad-debt expense. Credit losses this year will run between 8% and 9% of loans, higher than its spring forecast, and higher than the 5.9% of loans in the last fiscal year.

It said growth in credit-card receivables, which increased at an about 27% rate in the second quarter, will moderate into the teens by the fourth quarter.

Target has successfully managed inventories and labor expense controls to avoid profit-sapping mark downs and expenses, Gregg Steinhafel, chief executive, told investors Tuesday. Retail gross margin, a measure of profitability, rose slightly in most areas, he said.

Net declined to $634 million, or 82 cents a share, from $686 million, or 80 cents a share, in the year-earlier quarter. Per share profit increased as a result of stock repurchases that reduced the number of shares outstanding.

Revenue rose 5.8% to $15.47 billion. Retail sales, excluding credit-card revenue, rose 5.6% to $14.97 billion, from $14.17 billion boosted by new store openings. Sales at stores open at least a year, a measure of retail-market share, declined 0.4% in the quarter.

source :http://www.google.com/news?

Target to Slow Expansion as Net Falls

Discount retailer Target Corp. will curb store expansion and tighten credit-card terms after reporting fiscal-second-quarter net income fell 7.6% because of credit-card write-offs and weak sales.

The Minneapolis store chain said profit from credit-card operations fell sharply for the fiscal quarter ended Aug. 2 as a result of write-offs and the sale earlier this year of a half-interest in its credit-card receivables.

The operation, which had been delivering strong profit, reported income tumbled 65% to $74 million, from $213 million a year earlier. In May, Target sold a half-interest in its card receivables to J.P. Morgan Chase & Co. for $3.6 billion.

The company said it is slowing the growth of its credit-card portfolio and revising credit terms to counter higher bad-debt expense. Credit losses this year will run between 8% and 9% of loans, higher than its spring forecast, and higher than the 5.9% of loans in the last fiscal year.

It said growth in credit-card receivables, which increased at an about 27% rate in the second quarter, will moderate into the teens by the fourth quarter.

Target has successfully managed inventories and labor expense controls to avoid profit-sapping mark downs and expenses, Gregg Steinhafel, chief executive, told investors Tuesday. Retail gross margin, a measure of profitability, rose slightly in most areas, he said.

Net declined to $634 million, or 82 cents a share, from $686 million, or 80 cents a share, in the year-earlier quarter. Per share profit increased as a result of stock repurchases that reduced the number of shares outstanding.

Revenue rose 5.8% to $15.47 billion. Retail sales, excluding credit-card revenue, rose 5.6% to $14.97 billion, from $14.17 billion boosted by new store openings. Sales at stores open at least a year, a measure of retail-market share, declined 0.4% in the quarter.

Target, which gets about 40% of sales from clothing and home decor, has been harder hit in the downturn than discount rival Wal-Mart Stores Inc., which gets about 40% of its sales from consumables, such as groceries. Wal-Mart has reported strong same-store sales gains all year.

Doug Scovanner, chief financial officer, said Target will trim about 20 stores from its new store openings next year. Target had previously said it planned to open between 90 and 100 stores this year and next.

Economic conditions continue to be volatile. The total use of credit cards for store purchases, which had been rising, was flat in the fiscal first quarter and down in the second quarter, he said. "The use of credit cards is determining our same-store sales," Mr. Scovanner said.


Source : www.new.google.com

Many Low-To-Moderate Income Americans Still Not 'Banked' Despite Numerous Financial Options Available

MIAMI and BOSTON, Aug 18, 2008 /PRNewswire via COMTEX/ ----A new study shows that nearly one-third of low-to-moderate income (LMI: 40.00, -1.31, -3.17%) Americans are either unbanked (holding no basic bank account) or underbanked (having a basic bank account and yet relying on less sophisticated methods for everyday transactions such as check-cashing). This problem is particularly acute for LMI Hispanics, 53% percent of whom are either unbanked or underbanked. Only 23% of non-Hispanics fall into this category.

The latest Americanos Poll(R: 68.05, -2.58, -3.65%), a collaboration between market research firm Encuesta, Inc. and microlender ACCION USA, sheds light on the financial attitudes and behaviors of U.S. low-to-moderate income individuals, with special focus on the habits of U.S.-born and foreign-born Hispanics. Survey results are available upon request.

The survey finds that while LMI Americans say they are managing their personal debt, many struggle to use credit wisely. Many acquire personal debt for everyday living expenses such as for bills (15%) or food or housing (11%). Fifteen percent turn to credit cards for cash advances. Only 45% are "very" familiar with how to build or manage their credit. Here too, Hispanics are most in need of guidance: only 36% are "very" familiar with how to build or manage credit, compared to 46% of non-Hispanics.

Other key findings from the Americanos Poll:

-- Many low-to-moderate income Americans are not taking steps to secure their financial future. Forty-three percent do not consistently save; 21% claim there simply is not enough money left after paying for living expenses and bills and 22% report they spend more than what they save. Furthermore, while LMI individuals express interest in investments, home ownership is the only asset class in which significant numbers (42%) are invested.

-- Familiarity with various financial products and services among low-to-moderate income individuals is limited. Fewer than half profess awareness of educational savings accounts (32%), credit/debt counseling services (39%), or even common loan products such as equity credit lines (43%).

-- LMI Hispanics rate their awareness of many financial products 10 to 30 points lower than do LMI non-Hispanics. For example, 68% of non-Hispanics rate themselves "very" or "somewhat" familiar with home loans and mortgages, vs. 43% of Hispanics. For other select products, the non-Hispanic vs. Hispanic breakdown is as follows: checking accounts, 95% - 76%; regular savings accounts, 90% - 68%; retirement savings accounts, 68% - 38%; small business loans, 33% - 19%.

-- For many LMI Americans, check cashing and bill payment habits constitute a major hurdle to the use of more sophisticated banking services. Overall, 39% use cash for paying bills and 30% pay via money order. LMI Hispanics in particular favor cash for this purpose (65% vs. 34% of non-Hispanics). Hispanics are also more likely than non-Hispanics to manage their income on a cash basis, with nearly three in 10 (28%) cashing checks at the issuing bank, using check-cashing outlets or being paid in cash, compared to 12% of non-Hispanics.

source : http://www.google.com/news?