Category: Credit Cards

Credit card debt is once again becoming a major problem for consumers and, as a consequence, many are experiencing more stress over their balances and wondering how to get out of debt.

The number of Americans who worry about their credit card debt all or most of the time rose to nearly 20 percent in recent months, according to a new poll from the Associated Press and GfK. In addition, about one-third say that if they were to purchase something on a credit card, they would be unable to pay off the balance at the end of the month.

"For three months I scrape by and I can only afford to make the minimum payments on my credit cards," high school teacher James Moran of Shelton, Conn., who owes $5,000 on his cards and about $14,000 in student loans, told the news agency.

In all, stress over debts has risen 17 percent since November, climbing to rates seen in 2009 – during the recession – and again last spring, the report said.

One contributing factor to the higher stress levels may be that consumers are having more trouble affording food and gasoline, prices for which have risen sharply in the last several months.

As part of the continuing expansion of both payment processing networks and cellphone service providers into the mobile purchase market, two major names recently teamed to launch a new platform.

American Express and Verizon Wireless recently launched a new program that will allow consumers to take on credit card debt using their smartphones in a new way, according to a report from the tech news site CNET. With the American Express Serve program, consumers will be able to make online purchases through their smartphone or tablet device by entering their phone number, rather than their credit card information.

Verizon in particular has been quite active in attempting to develop new mobile payment strategies and foster adoption, the report said. It has already reached similar accords with a number of companies, including its top two competitors in the phone service industry, in an effort to expand its presence in the burgeoning market.

However, many consumers are wary about mobile purchases, not just because they have likely worked to reduce debt over the last several months, but also as a result of security concerns.

Many consumers across the country are dealing with high credit card debt as a result of money problems experienced during the recent national recession, but some states have been more affected than others.

New data from Credit Karma shows that California is the most indebted state in the nation, with consumers there carrying balances of $336,169, according to a report from Yahoo Personal Finance. That total includes all types of credit – mortgages, auto loans, credit card debt and so forth – excluding student loans. However, that high total is also 4 percent less than the amount last year as consumers worked to reduce debt.

Hawaii came next, checking in with an average debt of $321,258, a decline of 7 percent, the report said. Maryland rounded out the top three with an average indebtedness of $263,524, which changed less than 1 percent.

Other states in the top 10 included New Jersey, Washington, Massachusetts, Virginia, Connecticut, Colorado and Nevada, the report said. However, none of those states saw their average citizen's debt increase in the last year.

Many consumers are still struggling with credit card debt, however, as a result of higher prices for basic necessities like food and gasoline.

While a large number of consumers are struggling under tremendous credit card debt and other balances they were forced to take on during the recent national recession, those in some states have largely been able to avoid some of thoseproblems.

Residents of Oklahoma have the lowest average indebtedness in the country, owing just $126,027, according to a report from Yahoo Personal Finance based on statistics from Credit Karma. This marked a 3 percent decline from the same study last year, and was based on all types of debt – ranging from credit card debt to auto loans and mortgages – except student loan obligations.

West Virginia and Arkansas, at $127,535 and $128,460, respectively, were also in the top three, the report said. In addition, Mississippi was the only other state with less than $130,000 in average debts in the nation. Indiana, Kansas, North Dakota, Kentucky, Iowa and Nebraska were also listed in the top 10.

Credit card debt has been particularly troublesome for many consumers to become debt free because of the large amount many have to spend on necessities just to make ends meet these days.

The economy may be recovering slowly, but many small business owners are still having trouble getting enough capital together to cover their needs, and are therefore relying more heavily on the ability to take on credit card debt.

The majority of the nation's 27 million small businesses rely heavily on credit cards to provide working capital, and the ongoing economic problems in the country have caused many to increase the amount they borrow and scale back the amount they pay on their monthly bills, according to a report from the Wall Street Journal. The National Small Business Association will soon release statistics that show many of these companies have allowed their balances to grow to between $10,000 and $25,000 while fewer now have debt totals of less than $10,000.

In addition, fewer are paying off their credit card bills every month, continuing a trend observed since June of last year that may make it more difficult for them to get out of debt, the report said.

This may end up being problematic for many small businesses because their credit cards are not protected by the same regulations as consumer accounts, and therefore can see the terms of their agreements change without notice.

Consumers in the U.S. have taken to using their credit cards more often in recent months, spelling a huge surge in profits for the world's biggest payment processing network.

Visa recently announced that it saw profits surge by 40 percent in the fiscal third quarter of the year to $1 billion, beating analyst estimates, according to a report from Bloomberg News. This change was largely the result of U.S. credit card spending ticking up 9.8 percent during the three-month period, as consumers charged $224 billion worth of transactions.

However, the company also believes that the new swipe fee regulations for debit card transactions will likely cut into its profits going forward, the report said. The U.S. made up about 59 percent of the network's total sales last year, but Visa chairman and CEO Joseph Saunders says the company wants to make it a 50-50 split with international markets by 2015.

Many consumers these days haven't been able to get out of debt because of the rising prices for many necessities like food and gasoline, which has overextended their personal budgets.

Many consumers saddled with massive amounts of credit card debt have had trouble dealing with it in the past, but may now be in a better position to continue getting out of debt.

Between the first quarters of 2009 and 2010, consumers paid about $72 billion more into their credit card debt than what they spent on those accounts, according to a new study from the credit monitoring bureau TransUnion. This stands in stark contrast to the previous theory of many financial experts, which indicated charge offs were the primary reason for continual declines in debt levels.

"Charge-off is a more predominant driver of deleveraging among subprime consumers," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "Among prime consumers, paydown is the major factor. Although it sounds simple, this is critical insight for lenders: it allows them to better understand the preferences of various sub-segments of consumers and respond appropriately to each."

All of the nation's top credit card lenders have seen profits climb significantly in the last several months, as both more conscientious bill payments and previous defaults reduced the number of charge offs.

While there are now a number of services that allow businesses to process credit card debt without consumers having to swipe their cards, a new company says it has taken the next step in protecting borrowers from fraud when doing so.

The online payment processing service Jumio will soon launch a program that allows consumers to make a swipeless payment simply by holding their credit or debit card up to a camera, according to a report from the tech news agency GigaOm. The video image of the card is streamed, encrypted, to the company's servers and software determines where the payment information is located. However, consumers will still have to enter their security code manually.

But what separates Jumio, which will soon launch a mobile version of the service as well, from its competitors is that it can tell the difference between a copy of a credit card and a real one, the report said. This is because the software can detect the raised letters on an actual card.

Security, or at least the perception that this process is somehow less secure, is seen as one of the major hurdles for widespread acceptance of mobile credit card payment processing.

The rates of delinquent and defaulted credit card accounts for the nation's six largest lenders have improved considerably over the past several months, meaning far bigger profits for the financial institutions, and that trend continued through the month of June.

Five of the nation's top six credit card lenders have filed their monthly reports on their company's credit card business, and all saw improvements in the rates at which they had to write off seriously delinquent accounts as being uncollectable, according to a report from the Associated Press. Similarly, four of the five saw delinquent accounts dip as well. Only Citibank has yet to make its monthly regulatory filing with the federal government.

Only Capital One Financial saw delinquency – accounts 30 days or more past due – increase in June, the report said. This continued a trend that has seen late payments fall to lows not seen since before the start of the national recession for nearly all lenders.

Meanwhile, charge offs – those accounts 90 days or more behind on payments that lenders feel they will never recover – slipped across the board, with Bank of America seeing the largest declines, the report said. JPMorgan Chase and Discover Financial Services also saw large improvements in defaulted accounts.

Significant declines in industry-wide charge off rates are good news for lenders, who previously had to set aside tens of millions of dollars per month to offset the losses from those defaulted accounts, the report said. But because these rates have slipped repeatedly since late last year, almost all of the country's top six lenders are now enjoying appreciably higher profits from their credit card businesses.

Further, consumers are now returning to more frequent use of their credit card accounts now that the economy has begun to improve again, the report said. During the recession, not only were charge off rates at or near all-time highs, but consumers wary of digging themselves into deeper debt largely swore off credit card use.

Some experts warn that continued improvements in defaulted credit card accounts are likely to continue, because most lenders have already forced most riskier borrowers out of the lending system as a result of past defaults. Now, those consumers are likely to find it difficult or even impossible to find new lines of credit.

Former Ohio Attorney General Richard Cordray was recently announced as the first head of the Consumer Financial Protection Bureau, just days before the agency is set to gain full regulatory power over the lending industry. Obama said Cordray was picked because of his strong commitment to protecting the middle class throughout his career.

Many within the banking industry believe that Cordray could impose more harmful measures against the lending industry than the previous favorite to win the post, Harvard law professor Elizabeth Warren. It was Warren who was originally tasked with building the agency and setting some of its goals.

Republican lawmakers had been critical both of the bureau itself and Warren in particular, and had vowed to stonewall her appointment to the post. But with Cordray taking the helm instead, the way lenders deal with consumer credit card debt may soon be drastically altered because of his cavalier approach to reigning in predatory practices by the banking industry.