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  • Merchants may begin offering discounts to some credit card users

    Merchants may begin offering discounts to some credit card users Interchange fees, which credit networks charge for everything bought with a credit or debit card, were recently the subject of a settlement between the Department of Justice and both Visa and MasterCard, according to a report in the Seattle Business Journal. These charges typically run between 2 and3 percent of a purchase price.

    But under the terms of the settlement, these two credit networks will have to offer a low-fee card to consumers, which would carry an interchange fee of just 1.5 percent, the report said. While this card wouldn't carry any rewards programs, a number of major retailers are now considering offering people who use these cards discounts on their purchases.

    Their incentive to do so is obvious, the report noted. Interchange fees of 2 to 3 percent on all purchases may seem like a relatively insignificant amount, but it costs the industry billions every year.

    "It doesn't sound like much," Craig Shearman, vice president of public relations for the National Retail Federation, told the news source. "But it adds up – $48 billion between the two each year is collected by credit card companies."

    However, some industry experts warn that it may be difficult for retailers to distinguish between the low-fee cards and normal ones, as the new pieces of plastic will carry no identifying marking. Because of this, most store employees won't know to enact the discount on their own, and it will be difficult for their payment processing systems to do anything to add the discounts after a card has been swiped.

    Prior to the settlement being reached between the government and these networks, lenders often made businesses that accepted credit card payments enter into contracts saying they would not offer discounts to those who used forms of payment other than credit cards. Under the new rules, that will be allowed, the report said.

    American Express was also sued by the Department of Justice, but rather than settle, it has decided to fight the suit.

  • Credit Management

    Credit Management

    Many consumers are finding themselves buried under a pile of mounting debt. With interest accumulating month after month in addition to late fees being charged, many consumers are finding it difficult to make just the minimum payments on their credit cards. Although this may seem like an endless battle, with a strict budget and some discipline there are credit management strategies and solutions that will allow consumers to reduce or even eliminate their debt.

    Consumer Credit Counseling
    Consumer credit counselingworks with consumers by placing them into a repayment plan. Interest rates, late fees and penalties are negotiated in this program and it could take up to 4-5 years to pay off. Similar to other credit management programs, this solution may not be suitable for everyone. Below is a list of pros and cons of this program. Weigh your options carefully before choosing what is best for your current situation.

    Pros
    • The program places you into a monthly payment plan for an allotted time frame. Once you complete the program you are then debt free.

    • Generally, one payment is made to the credit management counselor, instead of having to make multiple payments to several different credit card companies. Organization tends to be a problem for a lot of consumers who have to keep up to date with multiple credit cards. The counseling program allows them to make one payment to the counselor and the credit counseling company manages all the accounts and makes payments to the creditors on your behalf.

    • If you have been late multiple times on your payment, your interest rate may be as high as 20%. Creditors are more likely to lower your interest rates knowing that you are in some form of credit management program.

    Cons
    • You may find that the minimum payment required to complete the program is too high. Since, the credit counseling program focuses on the reduction of interest rates and not the reduction of principle balances, you may find that the program isn’t aggressive enough for your situation. If this is the case, you may want to consider a debt settlement program where your actual principle balance is negotiated.

    • For some, the length of the program may be too long for certain financial situations. When in a credit management program, if the payment is missed there is a chance that the creditor will increase interest rates or reinstate penalty fees. So, if you are unable to make a payment due to a financial hardship, the interest rates and penalty fees may be reinstated.

    • Debt is noted on the credit report as “not being paid as agreed”. Although, this notation is not supposed to impact your actual credit score, it may prevent you from getting approved for a new credit card or mortgage. Most lenders and creditors frown upon such marks on your score caused by such a credit management program.

    • Creditors who agree to lower or stop charging you interest, may place “freezes” on your accounts even though you have been current on your payments even before starting the credit counseling program. This will prevent you from using your credit cards once you are in the program.

    • The credit management program does make a mark on your credit report. The creditors that are paid off through this program are notated on the report as ‘Customer in CCS.’ This notation on your credit report is not supposed to impact your score, however, it may play a role in whether or not the person who is offering you credit will do so, with such a mark on your credit report.

    • If you are trying to obtain a mortgage, this may prevent you from getting approved. Most lenders frown upon such marks on your score.

    Debt Settlement
    More aggressive than consumer credit counseling, debt settlement programs work on reducing the actual principle balance of the debt, and can provide a constructive alternative to credit management. Trained negotiators work with credit card lenders to reduce the total amount owed on each card, which differs from consumer credit counseling where only the interest rates and late fees are reduced. A debt settlement program places consumers into a payment plan that fits their budget. These affordable payments are often as low as half of their combined current payments. Although debt settlement has a short-term negative impact on credit, this aggressive program tackles the debt in about 124-48 months.

  • Retailer credit cards carry significantly higher interest rates than traditional accounts

    Retailer credit cards carry significantly higher interest rates than traditional accounts However, a new study found that these accounts typically have far higher interest rates than those for traditional cards. U.S. Representative Anthony Weiner's office conducted a survey of 35 major retailers in New York City to determine the APR on credit card debt for store-issued accounts, and found that the average rate is 23.83 percent, about 22 percent higher than those granted by banks.

    This rate is up slightly from the one observed in 2008, the report said. Two years ago, the average APR on these cards was 21.71 percent. The current rate is more than nine percentage points higher than the national average for bank-issued cards, which is currently 14.78 percent.

    "As this survey demonstrates, store charge cards can be very expensive if you don’t pay the bill in full every month," Chuck Bell, programs director for Consumers Union, publisher of Consumer Reports, told Weiner's website. "Consumers need to be aware that store cards usually carry sharply higher interest rates than ordinary credit cards. Don’t succumb to high-pressure holiday pitches to open up a new store account without carefully checking the interest rate, penalty and late fees, and other fine print."

    Radio Shack's account carried the highest rate on credit card debt, with an APR of 28.99 percent, the study found. Not far behind were both Staples and Best Buy, with rates of 27.99 percent. Home Depot and Sears both had cards carrying interest rates of more than 25 percent.

    The study also looked at retailers' introductory deals, and found many offered no interest for several months as a way to draw in more customers. However, the fine print often contained language that saw retroactive interest rates applied to all credit card debt that hasn't been paid off within the allotted time period.

    The federal government has already cracked down on many lender practices with the Credit Card Accountability, Responsibility and Disclosure Act, and several more additions to those regulations are currently being discussed.

  • American Express says lenders uncertain about economy

    American Express says lenders uncertain about economy American Express said the current economic climate, in which consumers seem wary of dealing with credit card debt, has many major lenders uncertain about the future, according to a report from the Wall Street Journal. In particular, banks are concerned about boosting the number of credit card accounts they handle.

    In the wake of tighter restrictions the banks imposed as a means of cutting down on losses to delinquent and defaulted credit card debt, many have found consumers are no longer interested in new accounts, the report said.

    "Consumers are saving more and borrowing less," said American Express vice chairman Ed Gilligan in a conference call with reporters. "Small businesses are cautious."

    Gilligan also pointed to a tougher regulatory climate as a reason for additional declines in profits, the report noted.

    Many consumers have made a greater effort to reduce their credit card debt in recent months by increasing their payments while also spending less on these accounts.

  • Consumer Credit Counseling

    Consumer Credit Counseling

    There are a numerous options for consumers who want to start getting their finances under control after accumulating large amounts of debt, which could inevitably lead to credit problems further down the road.

    Consumers who are in control of most aspects of their finances, but still feel like they could use additional help managing their debt burden, could certainly benefit from the assistance of a consumer credit counseling service.

    With a consumer credit counseling service, consumers enroll in a program that will educate them about the inner workings of their monthly finances, putting them in the driver’s seat to fixing their current credit situation with a solid debt management plan.

    It will also put them on the road to a healthier financial future, since they will apply their newfound financial knowledge to make better decisions going forward and to avoid their previous fiscal mistakes.

    Unfortunately, unlike other debt management methods, consumer credit counseling does not allow consumers to cut any of their debt, or even reduce their interest rates on current balances. They still have to pay off the entire amount of their outstanding debt. Consumer credit counseling simply teaches consumers methods that will help them improve their money management in the future, which will free up cash to pay down their current debt levels.

    Consumer credit counseling services can also help consumers learn how to set a monthly budget that will work for their personal situation that they can adhere to. Tracking their monthly financial incomes and outflows will allow consumers to cut back on unnecessary expenditures and apply the money they save to paying down the outstanding debts that forced them to seek consumer credit counseling services in the first place.

    However, as with most debt management options, consumer credit counseling does have a few drawbacks. In addition to having to repay the entire amount of their outstanding debt without any decrease in the interest rate, enrollment in such a program will appear on the consumer’s credit report, even though it will have no bearing their credit score.

    Enrollment in a consumer credit counseling service on a credit report can make it more difficult to obtain a loan or even an unsecured line of credit, such as a new credit card, for some time thereafter. Lenders tend to be more wary of a consumer who has run into debt problems in the past, punishing them with a higher interest rate, even if he or she has made considerable headway in repairing his or her financial situation.

    A consumer who chooses to enroll in a consumer credit counseling program should carefully research both the process itself and the organization through which they will receive the help. Not to mention, carefully evaluate the negative ramifications it might have on obtaining future loans or credit cards with higher interest. Such evaluation will not only help determine whether the process is best for their current financial situation, but also for any future considerations such as car or home purchase.

  • Most consumers will avoid credit card debt this holiday season

    Most consumers will avoid credit card debt this holiday season Only 27.6 percent of consumers said they will use their credit card accounts as their primary method of payment this holiday season, according to a new poll from the National Retail Federation. Instead, 43 percent say they will lean on debit cards, and 25.7 percent reported cash will be their preferred way to buy gifts.

    "Many families may choose to leave credit cards at home as they shop this year, making sure to only purchase what's on their list and within their budget," said NRF president and CEO Matthew Shay.

    The number of consumers who will take on credit card debt was the lowest observed in the poll since 2002, the report said. Meanwhile, the rates of debit card and cash use increased.

    Many lenders are trying to entice consumers to use their cards this season, upping rewards for every dollar of credit card debt they take on.

  • Chase says October charge offs lowest in a year

    Chase says October charge offs lowest in a year The total charge offs Chase dealt with in October reached the lowest point this year, according to a report on the lender's filing from the Associated Press. The month saw seriously delinquent credit card debt dip to 7 percent, down from 7.78 percent in September. The yearly high was 10.91 percent, observed in January.

    Meanwhile, Chase also said that delinquencies – credit card debt that's 30 days or more past due – dipped as well, but only slightly, the report said. October saw this rate fall to 3.81 from 3.82 percent in September. The 12-month high was seen in December 2009, when it was 4.94 percent. Often, experts view these late payments as future indicators of charge offs.

    Many consumers have made a greater effort to reduce their credit card debt recently by increasing their monthly payments while simultaneously spending less with these accounts.

  • Credit card delinquencies fall in October

    Consumers cut debt in October. Given the current unstable economy and high unemployment numbers, many Americans are taking steps toward credit card debt reduction.

    Capital One, Discover Financial and Bank of America reported today that late payments on credit cards fell to their lowest levels of the year.

    The October numbers are a signal to many economists consumers are conducting better credit management, making timely payments and reducing their debts, ABC reports. Discover found its delinquency rate fell from 4.41 to 4.34 percent, while Capital One's figures declined 1.12 percent.

    "It's nice to see that consumers feel more confident in at least being able to pay their other bills," RBC Capital Markets analyst Jason Arnold told ABC. "We still have a very slow recovery ahead of us, but it's encouraging to see the seasonal trends being overwhelmed by credit performance."

    Charge offs, credit debt that banks don't believe will be collected, also fell for most of the major companies. The lone exception was Bank of America, which saw its numbers climb to more than 10 percent, after falling to 9.99 percent in September.

  • Lenders offering greater rewards on credit card debt this holiday season

    Lenders offering greater rewards on credit card debt this holiday season Most major lenders say they will soon enact greater rewards programs in an attempt to convince more consumers to take on credit card debt this holiday season, according to a report from Bankrate. Many are offering 5 percent cash back on purchases with rewards cards at popular retail locations such as electronics stores, department stores, clothing stores, or even restaurants.

    Others are making a greater effort to convince consumers to add to their credit card debt by offering steep discounts at their own online shopping sites, the report said. In some cases, these deals can save customers up to 20 percent. Similarly, they may offer more cash back for shopping with select online retailers.

    Many consumers could be reluctant to add to their credit card debt this holiday season, as the national recession may have changed Americans' spending habits.

  • Nationwide credit card debt could continue to decline

    Nationwide credit card debt could continue to decline National consumer credit card debt has shrunk to $822 billion in recent months, and now makes up just 6.4 percent of all outstanding balances Americans owe to financial institutions, according to a report from CNN Money. That's down from 7.6 percent in 2004. In addition, the total has fallen 15.5 percent since the beginning of the recession thanks to a decline of $151 billion.

    Meanwhile, the growth rate for credit card debt has been slowing since early 2008, but may soon begin expanding again, the report said. Even if the rate reverses itself, it would still take another two years to reach pre-recession levels.

    The recession seems to have altered consumer attitudes toward credit card debt, as many have reported reducing their reliance on these cards for spending, and have also increased the rates at which they pay into the accounts every month.