Category: Credit Cards

Millions of Americans have made significant progress in the last few months when it comes to getting their bills paid on time and taking steps to reduce debt, and that new trend may prompt lenders to further expand efforts to issue more cards in the new year.

Declining rates of credit card default and increased spending may be enough to entice the nation's top credit card lenders to continue their efforts to broaden lending standards so that more Americans have access new accounts, according to a report from The Associated Press. The credit monitoring bureau TransUnion recently reported that these efforts were already under way earlier this year, as more than a quarter million new cards were issued to those with moderate credit ratings who would not have had access to these accounts just a year prior.

Lenders significantly tightened lending restrictions during and immediately following the recession as default rates climbed to all-time highs as a result of extreme economic difficulties faced by most consumers. However, those rates have since fallen to near-record lows in the past year.

Most consumers who have gone shopping at major retailers in recent months have probably noticed that more are offering store-branded credit cards – usually with the promise of a moderate discount on the cost of their purchase that day. And those efforts will likely expand in the coming months.

One reason for this is that Citi will soon rename its private-label credit card business and focus on expanding its offerings not only with current partners, but new ones as well, according to the lender. The new company, known as Citi Retail Services instead of the current name (Retail Partner Cards) will also aggressively work to expand available loyalty rewards programs for consumers.

The company also recently added Ford Motor Company to its list of card partners, meaning it will provide financing for parts and service at 3,000 dealerships nationwide, the report said. Currently, Citi has issued close to 90 million accounts through its retail card business.

Retailer cards are generally frowned upon by experts, however, because they carry higher interest rates than regular accounts, which can lead consumers to have more credit card debt than they are comfortable with and make it harder to get out of debt if they fall behind.

With millions of Americans still dealing with credit card debt on accounts they may not fully understand, the new federal bureau is asking for the public's help in shaping a new document to help clarify many aspects of a lending agreement.

The federal Consumer Financial Protection Bureau is seeking public comment on its new proposed credit card lending agreement, which is designed to clarify some parts of a deal by listing the terms in simple language and larger print, according to a report from ABC News. Americans can visit the CFPB's website, view the document as proposed and enter their suggestions at the bottom of the page.

The proposed document cuts the number of words in a credit card agreement from the current average of about 5,000 to a little more than 1,000, the report said. However, once finalized, the document will not be mandatory for lenders to use, which may cause its adoption to be slow at first.

Experts believe that the CFPB's efforts will eventually lead to clearer agreements between lenders and consumers for all financial products, though the agency is currently focusing on credit cards and mortgages.

For those who earn rewards such as cash back or points for every dollar of credit card debt they take on, it may often be difficult to determine exactly how they're earning those benefits.

Experts say that a lack of disclosure from the nation's top credit card lenders might lead consumers to not earn as many points as they might otherwise was be able to, according to a report from Smart Money. In most cases, lenders send statements that only outline the total number of points earned in a given month, rather than an itemized list. In the best cases, consumers may receive a breakdown of points earned by spending category.

And while advocates say greater disclosure would be a boon to borrowers, lenders believe that adding any more information to a statement would make the document too cluttered and difficult to understand for consumers, the report said.

Consumers who want to better understand the way they earn rewards on their credit card accounts may want to consider closely reviewing their lending agreement to find ways they can maximize their benefits.

The number of consumers who are comfortable taking on credit card debt this holiday season fell significantly even as Americans say they plan to spend more on gift shopping.

The amount the average consumer plans to spend on holiday gift shopping has increased 22 percent from 2010, up to a total of $751, but at the same time, fewer are willing to take on credit card debt that they can't afford to pay back in full at the end of the month, according to the latest CNBC All-America Economic Survey. In all, just one in five consumers say they're planning to carry their credit card debt into the new year. Instead, they plan to rely more heavily on cash, checks, their debit cards.

The consumers groups most eager to avoid running up their credit card debt are those in the Midwest, those who are between 35 and 49, those who have a high school education or less, blue collar workers and African-Americans, the survey found.

Consumers have recently been increasing the amount they borrow on their credit cards, but spending hasn't even begun to approach pre-recession levels.

The amount of credit card debt consumers carried nationwide increased once again in October.

Americans' credit card debt climbed 0.6 percent in October, just as it did in September, according to the latest monthly statistics on consumer credit from the U.S. Federal Reserve Board. At the end of the month, consumers owed lenders a total of $792.3 billion, up from September's total of $792 billion. This was also the highest total observed in several months.

At the same time, consumers seemingly felt more comfortable dealing with other types of debt, such as student or auto loans, the report said. The amount of money borrowed on this type of loan – known as nonrevolving credit – rose 5.3 percent to a total of close to $1.67 trillion.

In general, Americans have been feeling better about their finances in recent months and consequently may believe that they are also in a more advantageous position when it comes to dealing with debt. However, experts recommend that consumers carefully review all aspects of their finances before obtaining new lines of credit.

Millions of consumers across the country are struggling to keep their credit card debt under control and would like to do anything they can to reduce debt quickly. Fortunately, a new movement might be able to help them achieve that goal.

An online movement has dubbed December 11 as "Balance Transfer Day," an event to encourage consumers to seek out and take advantage of the more generous balance transfer offers now being offered by the nation's top credit card lenders, according to a report from Time Moneyland. Because of increased competition among major issuers for consumers with strong borrowing histories, many have significantly beefed up their introductory offers for balance transfers.

Some lenders are offering teaser interest rates of as low as 0 percent for as long as two years to the most qualified borrowers in an attempt to woo customers away from competitors, the report said. However, these deals typically also come with an up-front balance transfer fee, usually of about 3 percent.

To truly take advantage of these more generous offers, consumers must also be prepared to increase the value of their monthly credit card payments so they can get out of debt more quickly.

Consumers continue to feel better about their finances, and when combined with seasonal increases in spending brought on by the holidays, that leads more Americans to take on credit card debt.

Consumer use of debit and credit cards to pay for purchases on Black Friday increased significantly on a year-over-year, according to data from First Data's SpendTrend analysis of Black Friday sales figures. In all, the number of transactions using these accounts jumped 7.3 percent over last year's totals, and the value of those purchases rose 6.3 percent. The latter fact may have come as a surprise to experts, as there was a significant increase in purchases seen last year as well.

The holiday gift purchasing continued throughout the weekend as well, as consumers took advantage of the deals offered by online retailers as part of Cyber Monday promotions, the report said. In all, dollar volume on ecommerce purchases made throughout the weekend surged nearly 20 percent over last year's totals.

Consumers tend to make more purchases using their credit cards during the holiday season, which will make it harder for them to reduce debt for some time. There are typically seasonal increases in credit card delinquency seen near the end of the year.

Most consumers tend to spend more when the holidays roll around, and now a greater number will take on credit card debt when shopping online, instead of using their debit cards.

Consumers who are generally feeling better about their finances in the wake of the recession are more likely to use their credit cards than they have been in the past few years, and online purchasing ahead of the holidays will likely see an even greater shift toward that payment method, according to the latest Online Retail Payments Forecast from Javelin Strategy and Research. In addition, they will likely spend more on their credit cards to make a single purchase than they would with debit.

The average online credit card purchase now amounts to $82.10, while the average debit transaction costs $58.29, the report said. This type of spending is also incentivized with promotions like those seen on Cyber Monday, when prime deals tend to entice consumers into spending more than they likely planned.

It can be hard for consumers to reduce debt around the holiday season, but sitting down and creating a budget before doing any shopping, and then sticking steadfastly to it, can be extremely helpful.

In the past few years following the onset of the recent national recession, millions of consumers became more conscious of trying to reduce debt in a number of ways. And now, even as the economy continues to improve in the wake of the economic downturn, many are still continuing those efforts.

The nationwide amount of debt owed by consumers to lenders for everything from credit cards to education loans and mortgages dropped 0.6 percent in the third quarter of the year to a total of $11.66 trillion, according to the latest Quarterly Report on Household Debt and Credit issued by the Federal Reserve Bank of New York. That's down from a total of $11.72 trillion at the end of the second quarter.

A large portion of that decline is attributable to drops in mortgage balances, which fell $114 billion between July and September, the report said. That's down 1.3 percent from the second quarter of the year, but the total amount of non-real estate debt rose by roughly the same proportion to a total of $2.62 trillion.

That change came even as the total amount consumers could potentially carry in credit card debt dipped $25 billion during the third quarter, in part due to the closing of 6 million previously open credit card accounts, the report said. Now, consumers have a total of 383 million credit cards open nationwide, though that total is down about 23 percent from the all-time peak observed in the second quarter of 2008. In addition, the amount owed on those cards is 20 percent below the high set in the fourth quarter of 2008.

But at the same time, consumer demand for new credit cards – when viewed as the amount of new inquiries within a six-month period – rose for the second quarter in a row, the report said. However, the overall delinquency rate across all types of credit rose to about 10 percent as of the end of September, up from the 9.8 percent observed in June.

However, some experts say that lenders have seen delinquency rates rise in recent months more as a result of the all-time lows that have recently been hit being largely unsustainable going forward, rather than a return to riskier borrowing habits by consumers.