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News Scan August

Credit Card News, Economy News, Banking Industry News - Apr 2014
  • An important deadline is nearly here for all retailers who accept credit cards in their bricks-and-mortar stores.
  • By October 1, you'll be expected to have upgraded your card terminals to accept so-called EMV cards--short for Europay, MasterCard, and Visa. These are the most advanced generation of credit cards, equipped with small microprocessors that secure point-of-sale transactions by encrypting the personal information of the cardholder.
  • If you haven't upgraded to newer machines, generally speaking you'll be on the hook for any fraud that happens with these cards after the deadline. Take a breather, though. The implementation won't happen overnight, and many card companies are just beginning to issue the cards, with about 120 million issued so far. While all card-accepting merchants are expected to transition by the deadline, the truth is by the end of 2015, financial services research group Aite Group says just 59 percent of retailers will be EMV equipped. It expects a more complete rollout to take two years.
  • The U.S. economy posted a much bigger rebound in growth during the spring than previously reported, thanks to greater spending by businesses and consumers.
  • The economy as measured by gross domestic product expanded at an annual rate of 3.7 percent in the April-June quarter, more than a percentage point greater than the initial 2.3 percent estimate, the Commerce Department reported Thursday. It was the strongest growth since last summer and marked a sharp upgrade from the anemic 0.6 percent advance during the January-March quarter.
  • To be sure, the GDP report provides a backward look at the U.S. economy, which has since been hit with deepening concerns about a slowdown in China and recent turbulence in global financial markets. It remains unclear how the U.S. economy will fare in the months ahead as a result.
  • There are lots of offers out there for zero percent interest rates on credit cards. Recently, many companies offered the rate, sometimes for up to 21 months.
  • Citi Simplicity and Citi Diamond preferred cards are the latest to make that offer. However, experts said every credit card can be zero interest, if you pay it off on time. Experts don't suggest transferring your balance to a new card.
  • Credit counselors said this can lead to maxing out your new card, putting you even deeper in debt. They added if you are getting a new card or applying for the first time, make sure to read the fine print.
  • This spring, traders and analysts working deep in the global swaps markets began picking up peculiar readings: Hundreds of billions of dollars of trades by U.S. banks had seemingly vanished.
  • “We saw strange things in the data,” said Chris Barnes, a former swaps trader now with ClarusFT, a London-based data firm. The vanishing of the trades was little noted outside a circle of specialists. But the implications were big.
  • The missing transactions reflected an effort by some of the largest U.S. banks – including Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, and Morgan Stanley – to get around new regulations on derivatives enacted in the wake of the financial crisis, say current and former financial regulators.
  • It can be difficult to pick a credit card that best suits your lifestyle and needs. And on top of that, high interest rates and fear of hidden costs tend to scare many people off. But when used the right way, credit cards offer perks that can earn you free travel, cash back rewards, or lower interest rates on existing debt.
  • It's important to know the pros and cons before picking a card, so to help you choose the best option, CreditCards.com offers the top four categories for credit cards.
  • 1. Travel reward cards: The idea of earning bonuses for just spending a minimum requirement on your card is an attractive one. Travel or rewards credit cards can offer sign-up bonuses ranging from 10,000 to 75,000 points or more within the first few months of opening your account. Plus, you'll get anywhere from 1 to 10 points on purchases you're already making regularly. These points add up quickly and can be redeemed for other travel rewards like flights, hotels, or cruises. Look out for limited time offers or sign-up bonuses, which could help justify an annual fee.
  • The drumbeat of disappointment is continuing for the U.S. economy, with the latest numbers showing the third quarter looking a lot like the first quarter.
  • While economists continue to search for signs that domestic growth is finally loosening the shackles of the financial crisis, the data suggest otherwise. An initial reading Monday for the third-quarter manufacturing outlook was bleak, and the spending outlook both for consumers and businesses does not suggest rapid improvement anytime soon.
  • Hence, the result: The Atlanta Federal Reserve's GDPNow tracking tool, which has been a pretty reliable rule of thumb lately, indicates third-quarter advancement of just 0.7 percent, with the momentum to the downside. The indicator has dropped 0.3 percentage point just in the past week as the model adjusts for a likely decline in inventory build for the three-month period. (The CNBC/Moody's Analytics Survey has GDP growth at a comparatively lofty 2.6 percent.)"
  • Astoria Financial in Lake Success, N.Y., has named a former Citigroup banker a director of business banking.
  • The $15.3 billion-asset Astoria hired Richard Saybolt for the position of director of relationship management for its business banking group. His territory for Astoria will include Manhattan, Brooklyn, Queens and Westchester County, N.Y.
  • Saybolt was previously manager of Citibank's New York City business banking group. He also oversaw relationship managers for Citi's commercial business in Manhattan and was marketing director for Citi's U.S. Commercial Banking Group.
  • U.S. Senator Elizabeth Warren wants financial regulators to examine whether a group of banks’ new messaging system can be used to circumvent compliance.
  • Warren, a Massachusetts Democrat, sent a letter to six agencies Monday asking whether the service will make it harder to obtain instant messages that can be used in investigations. The system was created by Symphony Communications LLC with funding from 14 financial firms, including Goldman Sachs Group Inc.
  • “My concerns are exacerbated by Symphony’s publicly available descriptions of the new communications system, which appear to put companies on notice - with a wink and a nod - that they can use Symphony to reduce compliance and enforcement concerns,” Warren wrote.
  • There are over 28 million small businesses in the U.S. Shockingly, 55% of small businesses, or 15.4 million, still do not accept credit cards. For the majority, the reason is simple – it costs them more money versus cash and check. These fees are typically marginal interchange feeds, but yes, there are costs for businesses to accept credit and debit cards. Of course for many, the opportunities far outweigh the expenses.
  • Here are the top 3 reasons SMBs should be accepting credit cards: Lost Sales: It’s estimated that the 15 million businesses not accepting credit cards are losing out on a total of $100 billion in annual sales. That equates to $7,000 of new and existing sales per company per year that are lost to a competitor because the company does not accept cards.
  • Cash is Dying: According to Javelin Research only 27% of in-store purchases are cash, while plastic card purchases comprise 66% of all in-person sales. And, there’s a growing number of consumers who will only shop at businesses that take multiple forms of payment.
  • The U.S. economy added 215,000 jobs in July. Economists surveyed by CNNMoney predicted the economy would add 216,000 jobs. Anything above 200,000 is considered very solid.
  • The unemployment rate stayed the same at 5.3%, which is its lowest point since April 2008, according to the Labor Department. That's considered near full employment.
  • "Job growth is quite strong," says Jim O'Sullivan, chief economist at High Frequency Economics, a research firm in New York. "This pace of employment growth is clearly strong enough to keep the unemployment rate trending down."

Why credit card debt is getting riskier

Source: CNBC Category: Credit Card News
  • The prospect of a Federal Reserve interest rate hike has plenty of investors on edge, but there is also another group that needs to take notice ... people who carry a balance on their credit cards.
  • Consumers have been taking on more credit card debt, and they are not paying it off every month. If interest rates rise, that behavior could become significantly more costly.
  • Total credit card debt stood at $901 billion in May, according to Federal Reserve data, up 3.19 percent from a year earlier and up further, from $839.5 billion, as of the end of 2010. It is the third largest type of household debt, after mortgages and student loans. And a Nerdwallet analysis of Fed data found that among households with credit card debt, the average balance stood at $15,863 as of July.
  • The progress made by U.S. banks since the last recession is pretty impressive, though their growth hasn't been consistent. However, the results of recent quarters and the projected improvement indicate that the turning point of consistent growth is not too far away.
  • Offensive actions have paired up with defensive measures like expense controls to make banks win over persistent challenges. Moreover, banks have earned the ability to deal with crises. They can now dodge pressures from the operating environment more easily.
  • Added to these is the impending change in the interest rate scenario, which should favor banks. The likely interest rates hike, though at a slower pace, will ease some pressure on net interest margin (NIM) - banks' key source of earnings. Small community banks, in particular, will be the beneficiaries of the rate hike, as the majority of their profit is dependent on lending.
  • Last week, we were hit with disappointing reports on wages, home prices, and consumer confidence. And while we learned GDP was growing again, revisions to earlier GDP reports were not great.
  • "Not only was economic growth slightly slower over the past few years but the composition of growth has shifted slightly in a less favorable way in regard to near-term growth," Wells Fargo's John Silvia noted. "Inventory building slowed in the second quarter but not nearly as much as had been expected. Slower inventory building will be a larger drag on growth during the second half of the year. Business fixed investment also looks to add less to growth during coming quarters, particularly given the renewed slide in oil prices. The economy will be leaning more heavily on the consumer going forward and even on that front we saw some warning signs."