Card Issuers

Congress gave credit cards a much-needed overhaul, aimed at ending some of the industry's worst practices and providing consumers with more information about the plastic in their pockets. One year later, the new Consumer Financial Protection Bureau is bringing together industry insiders, consumer advocates and academics today to determine whether it worked. And it's likely to get a mixed earful. Consumer advocates give the law a thumbs up, while industry experts say it has contributed to a bump up in interest rates on cards and less available credit for high-risk consumers.

Many consumers will resolve to pay off their credit cards for the new year, and their intentions are in the right place. But according to a recent study, how they go about it is likely to be wrong. Mathematically, consumers are best off eliminating the debt on the card with the highest interest rate first. But researchers found that many of us tend to pay off the card with the smallest balance first, even if it carries the lowest interest rate. By not tackling the most expensive debt first, we end up paying more in the long run. So why do we do it?

NEW YORK -- Back to school, for the modern student, means back to charging up a storm on credit cards. More than half the 9 million full-time college undergraduates have cards today, Visa reports. They're issued even to students who have no credit history and little income.Many students use their cards responsibly. Assuming you're not a serial shopper, it pays to get a card when you're in school. You'll never again be accepted for credit on such easy terms.But some students go so far into debt at so early an age that they ruin their credit history even before they graduate.

Don't automatically shred those credit card offers arriving in your mailbox. They just might contain an attractive rewards program. Card issuers grew stingy with rewards during the credit crunch and while they waited to see how much federal card reforms would hurt their bottom line, card experts say. But now that those matters are behind them, banks have been reviving rewards to make their cards stand out. "They are back, and they are back...

For years, consumers deep in debt turned to counseling agencies to negotiate repayment plans with credit-card issuers. But consumers are now in such dire straits, some can't even afford repayment plans despite concessions from card companies. So the National Foundation for Credit Counseling, a trade group for credit counselors, approached card issuers about making even more concessions for consumers without the resources to repay under a regular plan. The group announced last week that the top 10 card issuers, including Capital One, Bank of America, Chase Card Services, Discover and American Express, signed on. Of course, it is in the interest of credit-card companies to be more lenient, even though they will collect less in fees and interest.

After years of pretending it was immune from the forces of the marketplace, the credit card industry has embraced price competition like a long-lost friend.Perhaps it had no choice, considering another important development that has affected card issuers. Call it the end of the 1980s, the maturing of the baby boom generation or the fallout from the recession, but people are using credit cards more carefully -- charging less, keeping lower balances and paying off accounts faster.The wiser use of credit and increased competition have made the choices of low-interest-rate and no-fee cards greater than ever, leaving people with even average credit histories no excuse for paying 18 percent or 19 percent on a credit card.

Even as a growing number of people can't pay their credit card bills, major banks are jacking up interest rates and clamping down on credit limits. But two new bills in Congress are taking aim at what many consider credit card abuses, and legislators should act quickly to make them law. The House and Senate bills would prohibit banks from raising interest rates on existing balances, something banks and credit card companies have been doing with increasing...

BOULDER, Colo. -- Holders of bank credit cards are beginning to shop around for better deals on interest rates. The problem is that it might be too late for many card holders to swap out of high-rate cards.Credit card issuers -- usually banks, but also such big companies as American Telephone & Telegraph Co. -- are turning down 60 percent to 70 percent of their applications, industry observers say. No change to that policy is likely, especially if interest rates fall farther."Issuers absolutely are judging applicants on tighter standards," said Denny Dumler, vice president of operations for Rocky Mountain Bankcard System, the largest issuer of Visa and MasterCard in the region.

Don't automatically shred those credit card offers arriving in your mailbox. They just might contain an attractive rewards program. Card issuers grew stingy with rewards during the credit crunch and while they waited to see how much federal card reforms would hurt their bottom line, card experts say. But now that those matters are behind them, banks have been reviving rewards to make their cards stand out. "They are back, and they are back...

The Rev. Nathaniel Pierce of Trappe says he transferred his credit card balance to a Chase card a few years ago after getting assurances of a low interest rate and low monthly minimum payments. Now, Pierce accuses Chase of bait and switch tactics. Chase notified Pierce that starting next month, his minimum payment is going from 2 percent to 5 percent of his outstanding balance, roughly raising his monthly payment from $100 to $250. He suspects the shift is tied to credit card reforms that take effect in February.

Gamers: how do you feel about Sony's offer of free stuff after hackers accessed the PlayStation network , compromising information including credit card numbers and birthdates? According to Reuters, "Sony said on Sunday it would offer some free content, including 30 days of free membership to a premium service to existing users and in some regions pay credit card-renewal fees. Compensation would only be paid if users suffered damage, it added, without providing details. " One user in the story mentioned never trusting the network with his information again --- only using prepaid cards to access the system in the future.

American credit cardholders are known for running up debt. Now they are also spending billions of dollars annually to make sure their monthly bill gets paid even if they lose their jobs or some other hardship strikes. But a new government report shows that the price consumers pay for this debt protection may be too much for the benefits they receive. The Government Accountability Office reports that consumers shelled out about $2.4 billion in 2009 to the nine largest credit card issuers for debt protection products.

Congress gave credit cards a much-needed overhaul, aimed at ending some of the industry's worst practices and providing consumers with more information about the plastic in their pockets. One year later, the new Consumer Financial Protection Bureau is bringing together industry insiders, consumer advocates and academics today to determine whether it worked. And it's likely to get a mixed earful. Consumer advocates give the law a thumbs up, while industry experts say it has contributed to a bump up in interest rates on cards and less available credit for high-risk consumers.

Some credit card issuers offer payment protection programs that promise to cover or suspend monthly minimum payments if you fall on hard times. Such offers might be tempting in today's economy, where job insecurity remains high or an illness can easily push you over the financial edge. But don't waste your money. Payment protection is expensive and the benefits small. You'd be better off applying the money to reduce your card balance or socking it away for emergencies. Plus, the programs often have so many exceptions that your claim could be denied anyway.

Credit card offers to small businesses are up this year, but some consumer advocates worry they may be falling into the wrong hands. They fear banks are pitching business cards to ordinary consumers — not just to corporate professionals — to circumvent new credit card reforms that restrict fees and interest rate hikes. The new federal Credit Card Accountability, Responsibility and Disclosure Act applies only to personal cards, not to plastic issued for business purposes.

C redit card issuers are going to have to play by a whole new set of rules that take effect Monday and are considered consumer-friendly - but will also cut into some of their traditional sources of revenue. Don't expect those companies to take that lying down. Card issuers are expected to spend the next year experimenting with new products and fees - as well as higher interest rates - testing just how much consumers are willing to shell out. The Credit Card Accountability Responsibility and Disclosure Act, signed into law last May, is a sweeping overhaul of the card industry and includes provisions to help reduce the amount of interest consumers pay. The bulk of reforms take effect Feb. 22. As card issuers prepared for the new rules in recent months, many have raised interest rates on customers - to the dismay of consumer advocates.

Could a sign of economic recovery be in your mailbox? Synovate, which tracks credit card solicitations, reported last week that card offers mailed to consumers dropped about 6 percent from the first to second quarter this year, a far milder decline than in recent quarters. And some big issuers, such as Bank of America and Citibank, have actually increased their offerings. "That's the flattening out or bottoming out," says Anuj Shahani, director of competitive tracking services with Synovate's financial services group.

Many consumers will resolve to pay off their credit cards for the new year, and their intentions are in the right place. But according to a recent study, how they go about it is likely to be wrong. Mathematically, consumers are best off eliminating the debt on the card with the highest interest rate first. But researchers found that many of us tend to pay off the card with the smallest balance first, even if it carries the lowest interest rate. By not tackling the most expensive debt first, we end up paying more in the long run. So why do we do it?

On his way home from work recently, Rick Niles of Laurel stopped at a gas station to fill up and as usual pulled out his Shell credit card to pay. But this time, the card didn't work. "I thought it was a probably just a problem with the gas station," said Niles, 40, an aerospace engineer with Mitre Corp. in Northern Virginia. Days later he learned the truth. Citi, the card's issuer, had canceled his two-year-old account without advance notice, even though Niles says he pays the $200 or $300 balance each month and has a high credit rating.

Theodore Casser has been a loyal Bank of America credit card customer for about 10 years. But the prospect that the bank might start charging him an annual fee because he pays off his balance monthly has the Baltimore software developer ready to sever that relationship. "I take it almost as an insult," says Casser, who hasn't heard yet if he will be among the small percentage of unprofitable Bank of America customers to be charged a $29 to $99 fee starting next year. "I'm happy to take the hit to my credit rating to cancel the card."