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News Scan Jan 2015

Credit Card News, Economy News, Banking Industry News - Jan 2015
  • On the national plague of our debit cards, the supremes have spoken. Or rather, they have refused. You can’t blame them. This is a little bit of financial arcana that has passed over most of our heads while we were swiping our cards at the nearest Target or supermarket.
  • The justices of the US supreme court have refused to referee a long-simmering dispute between banks and retailers in their fight over fees on the estimated $1.4bn worth of card transactions that Americans make annually.
  • Here’s the problem, which most of us can relate to: banks love fees. But banks can’t levy a fee that isn’t “reasonable and proportional” to the cost of processing the transaction. That’s the rule under the terms of the Durbin amendment, which is part of the Dodd-Frank package of Wall Street banking reforms.
  • For the world economy, it’s a case of U.S. and them. That was the conclusion of investors, executives and policy makers as they ended their annual trip to Davos, Switzerland last week with the U.S. poised to outpace world growth for the first time since 1999. Celebrations were muted by questions over whether the strongest U.S. expansion in 11 years will prove strong enough to power the global economy or whether it will be undone by slowing growth in Europe and China.
  • “The U.S. can marginally help the world, but it cannot do it alone,” said former Deputy U.S. Treasury Secretary. He said there’s still a 50 percent chance that the drag from the rest of the world will prove greater than the momentum from the U.S. recovery.
  • The multi-speed global economy is already threatening the U.S. by driving the dollar to an 11 year-high against the euro, with few in Davos willing to bet against further gains for the greenback.
  • “Right now the U.S. seems to be the greatest place in the world to invest,” said the co-founder of Carlyle Group LP. “The biggest problem in the U.S. is that the dollar could become very, very strong.”

Credit score statistics

Source: CreditCards.com Category: Credit Card News
  • If you want to know how Americans are doing financially, take a look at their credit scores. Credit scores are key to determining whether you'll qualify for a mortgage, loan or credit card and how much interest you'll pay. The higher your score, the more likely you'll be approved for a favorable loan.
  • The credit scores of Americans tend to fluctuate over time, with different scoring systems showing slightly different results. FICO scores, the most commonly used model, range from 300 to 850 points. The average FICO score was 692 as of April 2014, up from 690 in October 2013 and 689 in October 2012.
  • VantageScore, the model developed by Experian, TransUnion and Equifax, also shows rising average scores, though they trend a bit lower than the FICO numbers. Like FICO, Vantage scores also range from 300 to 850. The average VantageScore in the U.S. in 2014 was 666, up from 664 in 2013.
  • However, the average VantageScore rises with age -- presumably as consumers build their credit history. Experian's State of Credit 2013 report found that Americans age 66 and older have the highest average VantageScore (735), while millennials have the lowest (628).
  • Interest rates on new credit card offers remained at 14.89 percent Wednesday for the third consecutive week, according to the CreditCards.com Weekly Credit Card Rate Report.
  • None of the cards tracked by CreditCards.com advertised new interest rates. Issuers left promotional rates alone as well.
  • Average credit card interest rates are currently at their lowest point in nearly three years. The last time rates were this low was in February 2012 when the national average briefly dipped to 14.87 percent.
  • This is the first time since August 2011 that the national average APR has remained below 14.9 percent for more than two consecutive weeks.

Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 14.89% 14.89% 15.03%
Low interest 10.24% 10.24% 10.37%
Balance transfer 12.80% 12.80% 12.64%
Business 12.85% 12.85% 12.80%
Student 13.14% 13.14% 13.27%
Cash back 14.91% 14.91% 14.91%
Airline 15.52% 15.52% 15.46%
Reward 14.89% 14.89% 15.00%
Instant approval 23.33% 23.33% 28.00%
Bad credit 22.73% 22.73% 22.73%

  • U.S. President will use Tuesday’s State of the Union address to present a three-point plan to help struggling American families, spelling out the defining philosophy of his presidency as “middle-class economics” in contrast to the trickle-down economics of the Republicans.
  • The senior White House adviser, did the round of Sunday television talk shows to lay the ground for a speech he said could be boiled down to just three words: “middle-class economics”. He told CBS the president would concentrate on “how we make paychecks go further right now, how we create more good-paying jobs right now, and how we give people the skills to get those high-paying jobs”.
  • As the president penultimate State of the Union approaches, it is taking on the overtones of a campaign strategy as much an expression of the practical agenda of an executive in his final two years in office. He is clearly exercised to define his legacy in stark contrast to the Republicans, with whom he has been at loggerheads through much of his presidency.

The 10 Best Savings Accounts in 2015

Source: USnews Category: Banking Industry
  • If your plan for 2015 is to improve your finances, one way to start is by going back to the basics and examining your savings account. In a time when interest rates are beginning to tick upward and fees are a bigger concern than ever, ensuring you have the right savings account should be the foundation for any financial plan.
  • Choosing a Savings Account in 2015: CEB’s Consumer Financial Monitor, which analyzes financial behaviors and trends, found only 7 percent of U.S. consumers opened a short-term savings product in 2014, which leaves the majority of bank customers seemingly content with their current savings account – if they even have one. Yet "saving money" tops the list of the most popular financial resolutions for 2015; if Americans are going to meet their savings goals this year, they need to be proactive about finding the best bank for their savings.
  • There are quite a few factors to consider before choosing a savings account, from minimum deposit requirements to interest rates and fees. But the reality is that many customers are settling. For example, the average savings account rate in the U.S. currently lingers around 0.17 percent APY, according to GOBankingRate data. But if you do some searching, you can find rates 10 times as high.
  • Lupe is a 35-year-old mother of three who immigrated to New York in 2003 from the eastern Mexican state of Veracruz. On Monday, she says, “The system will acknowledge for the first time that I exist.”.
  • The reason: New York City will unveil a new municipal ID program that could bring big changes for the city’s large undocumented population. Though all residents will be eligible to apply for the new ID, called IDNYC, undocumented New Yorkers are expected to benefit most.
  • There are an estimated 500,000 undocumented immigrants in New York City, an underserved and, at times, exploited population that lives in the shadows of the city’s gleaming skyscrapers.
  • In addition to a free one-year membership to the city’s leading cultural institutions, the IDNYC card will provide undocumented immigrants with the ability to access state buildings and open bank accounts with a number of participating financial institutions. Those participating banks and credit unions will also be announced as early as Monday, according to city officials.
  • Credit card consumers are missing out on some $240 a year in retirement savings by not directing cash rewards from credit card spending to a retirement account, according to a new study from Fidelity.
  • The Fidelity Investment Rewards American Express card, for example, earns debtors an unlimited 2 percent cash back on purchases when holders invest their rewards into an IRA or Fidelity-managed 529 college savings.
  • While using cash rewards cards can be a great way to help manage daily expenses and near-term financial priorities, these cardholders may be missing an opportunity to boost their savings for the long term, said the senior vice president of cash management at Fidelity.
  • That missed opportunity is so grave given that only 9 percent of Fidelity cardholders elect to invest cash rewards into retirement or college savings accounts, compared to 50 percent who use cash rewards for short-term purposes such as everyday spending and 45 percent that apply rewards to pay off existing credit card balances.
  • Job creation kept the pace in December, with the U.S. economy creating 252,000 jobs to close out the year, while the unemployment rate dropped to 5.6 percent.
  • The U.S. was expected to create 240,000 jobs in December, after adding an unexpectedly strong 353,000 jobs the prior month. The unemployment rate was seen falling to 5.7 percent from 5.8 percent a month earlier. An alternative measure that includes the underemployed and those who have stopped searching for employment also fell, moving from 11.4 percent to 11.2 percent, its lowest reading since October 2008.
  • After initially reacting positively to the report, markets changed direction with stocks opening in negative territory.
  • Businesses had been creating jobs at a monthly pace of 224,000, though wage growth remained modest and the drop in the headline rate had come in large part due to a decline in the labor force participation rate. Indeed, the participation rate continued to plummet, falling to a fresh 37-year low of 62.7 percent.
  • We are now in the sixth year of economic recovery since the end of the Great Recession in mid-2009, says the National Bureau of Economic Research, a group of academic economists that dates business cycles.
  • But, if upbeat economic forecasts come true, this could be the first year that feels like a recovery. There would be huge implications. It would soothe Americans’ bruised sense of self-worth and alter popular psychology for the 2016 elections.
  • The economy’s annualized output (gross domestic product) of $17.6 trillion is, after adjustment for inflation, only 8.1 percent higher than its peak in the fourth quarter of 2007.
  • Payroll employment of 140 million in November exceeded January 2008’s 138.4 million by a mere 1.2 percent.
  • Industrial production in November was only 6.7 percent higher than the 2007 average.
  • New housing starts of nearly 1 million units in 2014 were about half of 2005’s peak of 2.1 million units. (But recall: Overbuilding in the early 2000s contributed to the financial crisis.) At 5.8 percent in November, the unemployment rate remains well above the low of 4.4 percent in May 2007.
  • The history of banking in the United States is defined by sharp episodes of panic, in which legions of banks fail or are otherwise hobbled, intermixed with periods of calm and prosperity that last just long enough to dull any lessons learned in past panics.
  • One of the principal issues that haunts the bank industry is the failure among its less-experienced operators, not to mention the general public, to appreciate its frailty. Indeed, I don't think it's much of a stretch to say that most people consider banking to be synonymous with boring.
  • The problem with looking at banking through this lens is that it obscures two of the industry's defining traits. First, banks are among the most highly leveraged financial institutions in the world. And second, albeit as a consequence of the first, banks must constantly negotiate between phenomenal long-term success and abject short-term failure.
  • It doesn't matter how much money a bank makes in the many good years when the economy is roaring and few borrowers are defaulting on their loans. What matters most for long-term profitability is how well a bank weathers the short but severe panics which besiege the industry on an irregular but not infrequent basis. It's here where good bankers earn their keep.
  • Small business owners looking to ditch traditional credit card readers have more options than ever.
  • Online retailers Amazon and Etsy are just two of the latest companies to offer mobile credit card readers to small companies, joining the likes of Square, PayPal and Intuit. Mobile credit card readers are small devices that stick into a smartphone or tablet and allow credit cards to be swiped and accepted from anywhere. Small business owners say mobile readers can be cheaper than traditional in-store credit card readers, which often charge higher fees.
  • Dr. Greg Werner, a chiropractor in New York, ditched his traditional credit card reader for Square four years ago to save money. Werner has two offices, one in Manhattan and the other in Eastchester, New York. His prior credit card reader company charged his business about $50 a month for each machine.
  • Werner now has a Square at each office that he plugs into his iPhone or iPod Touch. The device itself is free, but it takes 2.75 percent of every swipe. Werner's old credit card reader charged about 1.7 percent for each swipe for most credit cards, plus an additional 15 cents. Swiping an American Express card cost about a percent more. He estimates that he's saved several thousand dollars since making the switch.
  • Since starting in 2009, Square had become one of the largest mobile credit card reading companies on the market. Square no longer discloses how many businesses use its device, but in 2012 the company put that number at more than 2 million businesses. And for the first time earlier this month, it processed more than $100 million in sales in a single day.
  • Credit card issuers will start making cards with computer chips that are supposed to make it tougher for hackers to steal credit card numbers and other information. The chip-based cards can be dipped into a terminal, instead of being swiped. In October, merchants that don't update their credit card terminals to accept chip-based cards will be expected to pay the cost of any fraud that occurs on one of the cards. Square is already taking pre-orders for a reader that can accept cards with chips. The new reader, which will cost $29, can also swipe cards, and the free swipe-only device will continue to be available. Square's competitors haven't announced plans yet, but many expect to offer a reader than accepts chip-based cards in the future.