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News Scan Nov 2014

Credit Card News, Economy News, Banking Industry News - Nov 2014
  • An estimated 140 million American shoppers are expected to start their holiday shopping in stores and online over Thanksgiving weekend, according to the National Retail Federation.
  • Many browsers show this by displaying a padlock icon near the address bar or the upper right corner of a window. Another easy way to make sure you're on a secure site is to make sure the URL starts with "https://".
  • Ryan said he advises shoppers to "be hesitant" of reacting to any emails or phone messages they may receive from people claiming to be from a store or their bank.
  • One such example he's seen is a scam email claiming a user's credit card may be deactivated soon unless they click a link that essentially leads them into a criminal's trap.
  • If your bank allows you to get email or text alerts about whenever your card is used, I think that's really an excellent way to monitor what is happening with your card, Ryan said.
  • An important factor behind the notable increase in profitability for the credit card industry over recent years has been the marked reduction in loan charge-off rates for the lenders from the highs they witnessed in late 2010. In the aftermath of the economic downturn, many cardholders defaulted on their obligations.
  • The situation for card lenders was exacerbated by the restrictions imposed by the Credit CARD Act of 2009 as well as several Federal Reserve rules which capped interest rates and fees. But as economic conditions improved, the volume of bad loans began to shrink steadily – allowing card lenders to free up some of their loan loss reserves over 2012-2013.
  • The table below summarizes the net charge-off rate for these eight lenders in each of the last eleven quarters. The data has been compiled using figures reported by individual institutions as a part of their quarterly announcements.
  •   Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14
    Citigroup 5.36% 4.82% 4.63% 4.37% 4.39% 4.24% 3.88% 3.76% 4.06% 4.04%
    U.S. Bancorp 3.75% 3.81% 3.80% 3.67% 3.68% 4.02% 3.62% 3.61% 3.77% 3.78%
    Wells Fargo 4.37% 4.35% 3.68% 3.72% 3.90% 3.90% 3.31% 3.40% 3.52% 3.19%
    Capital One 4.14% 3.13% 3.22% 4.32% 4.45% 4.36% 3.78% 3.98% 4.02% 3.56%
    Bank of America 5.45% 5.08% 4.51% 4.14% 4.12% 4.07% 3.49% 3.23% 3.14% 2.93%
    JPMorgan 4.34% 4.30% 3.59% 3.52% 3.50% 3.30% 2.88% 2.87% 2.88% 2.86%
    Discover 3.07% 2.79% 2.43% 2.31% 2.36% 2.34% 2.05% 2.09% 2.32% 2.33%
    American Express 2.30% 2.20% 1.90% 2.00% 1.90% 2.00% 1.70% 1.60% 1.70% 1.60%

  • The increase in spending levels over this period is key to higher revenues for the lenders over coming years. The chart shows how card payment volumes have grown between 6% and 7% year-on-year in each of the quarters since Q1 2011. We believe that this 6-7% annual increase in purchase volumes will continue over the coming years. But a faster-than-expected improvement in economic conditions could boost card usage at a faster rate.
  • The US economy is enjoying a period of sustained growth not seen in more than a decade, although public confidence in the economy continues to slide as wage and salary increases remain slow.
  • America's gross domestic product, the value of all goods and services produced in the country, rose at a 3.9 percent annualized rate in the third quarter, up from an initial estimate of 3.5 percent, according to figures released Tuesday by the US Commerce Department. Following a 4.6 percent increase in GDP in the second quarter, this is the biggest back-to-back advance since late 2003, according to Bloomberg.
  • An increase in consumer spending was a key driver for the sustained GDP growth. Consumer spending accounts for about 70 percent of the US economy, according to Bloomberg, and it grew at a 2.2 percent annualized rate in the third quarter, compared with the previously estimated 1.8 percent.
  • Low gasoline prices in particular have encouraged consumers to step up auto purchases, Bloomberg reported. The automobile industry is in position for an unprecedented sixth straight annual sales increase next year.
  • Stagnating income for many Americans has been described as a millstone weighing down the country's economic recovery. With the economy largely dependent on consumer spending to keep it functioning, the financial health of the nation relies on Americans having disposal income to spend. However, real income for the bottom 90 percent of Americans grew 0.7 percent from 1986 to 2012, according to The Economist.
  • Gallup's US Economic Confidence Index dropped four points this week, with 31 percent of Americans describing the economy as "poor" and 54 percent saying the economy is getting worse. Still, the polling service notes, the weekly score was one of the highest in 2014.
  • A recent study shows that he smartphone users in the United States and the United Kingdom are reportedly more satisfied with banking apps as opposed to the apps from retail giants.
  • The findings from the California-based research organisation Apigee Institute showed that while 45 percent of smartphone users have downloaded banking apps, only 27 percent of the same respondents downloaded retailers’ apps, a report on fiercefinanceit.com said.
  • “For banking, there are a lot of transactional services that are very useful to people and are amenable to being digital,” Bryan Kirschner, director of Apigee Institute, was quoted as saying.
  • Banks are also more realistic about the significance of their brick-and-mortar storefronts.
  • Leading retailers should be more creative to impress upon smartphone users so that they shop more through the online medium, the study said.
  • Christmas has come early for the vast majority of Americans whose paychecks are barely rising: a temporary tax cut of sorts in the form of plunging gasoline prices.
  • The surprisingly large drop in the price of oil since midsummer is a boon for most consumers and U.S. businesses. Economists calculate that households have already saved about $100 billion so far, a windfall that could help produce the best holiday shopping season since the Great Recession and add several ticks to U.S. growth in upcoming quarters.
  • The bonus savings from lower fuel costs could also act as an insurance policy for the improving U.S. economy. Global growth has taken a turn for the worse to pose a threat to the domestic recovery, while the Republican takeover of Congress could trigger more political battles with a Democratic-controlled White House that muddles the nation’s economic outlook.
  • Cheaper gasoline is not entirely a good thing. Falling prices, for, example, stem in large part from slumping economies in Europe and Japan and a slowdown in the rising Asian giant China. Persistent weakness overseas would eventually dampen U.S. exports and act as a drag on an American economy that’s more reliant on global trade than ever before. The U.S. is no longer an oasis that can easily prosper in an economic desert.
  • The other main factor fueling the plunge in petroleum is soaring U.S. production, which could make the domestic energy industry a victim of its own success.
  • More penalties for foreign exchange manipulation, Libor-rigging and mis-selling could take the total fines levied on the banking industry above $300bn (£190bn), analysts have predicted.
  • The total bill faced by banks for currency rigging is expected to quadruple in the next two years to more than $16.5bn, with fines meted out on Wednesday likely just the first in a wave of settlements, according to Morgan Stanley.
  • The analysts believe that global regulators will slap 10 banks with another $12.2bn in foreign exchange related fines. That is three times the amount announced on Wednesday.
  • The Financial Conduct Authority (FCA), together with regulators in the US and Switzerland, fined six banks $4.3bn after they found that traders had colluded in chat rooms to manipulate foreign exchange benchmarks.
  • The US Department of Justice, New York’s Department of Financial Services, the Federal Reserve, the US Securities and Exchange Commission, and the Hong Kong Monetary Authority are all still investigating foreign exchange rigging.
  • And that is unlikely to be the end of the financial pain. On top of regulatory fines, banks could face claims for billions in damages from clients.
  • Some 63 percent of private company leaders say they are optimistic about the U.S. economy, a new study shows. That's the highest level since early 2011, according to the latest survey from management consulting firm PwC. At the same time, they are decidedly less enthusiastic about the world economy, with 37 percent feeling optimistic about what's happening overseas.
  • Business leaders are willing to put money behind their enthusiasm, with more than a third saying they are planning major new investments. Just don't expect them to invest much in their own employees. Although most private companies are planning to hire, they say they will only increase headcount by 1.6 percent. "So while yes, employers are hiring, they're being very selective about it," write the authors of the report.
  • And they're not paying much more, either. Companies said they are only budgeting for a 2.75 percent wage increase for the typical hourly worker over the next year. That's enough to keep up with inflation, but barely. The cost of food and shelter rose about 3 percent over the last year, though prices are in decline.
  • Private companies are getting pretty specific about the types of workers they want to hire. For seven straight quarters, more companies are planning to hire skilled blue-collar workers, said Rich Stovsky, PwC's private company services leader, in the report.
  • Those workforce changes could also signal wage growth down the road, Stovsky added. That would be a welcome relief for U.S. workers who haven't seen wages increase much lately. American wages have only risen by 2 percent this year, according to the U.S. Labor Department.
  • The U.S. Economic Confidence Index reached -6 for the week ending Nov. 16 -- its highest score since June 2013. This is up two points from the previous week, and furthers a series of incremental improvements seen since late September.
  • The most recent weekly index score of -6 is just three points off the -3 registered in June 2013, the highest Gallup has found since it began tracking economic confidence daily in January 2008.
  • Gallup's Economic Confidence Index is the average of two components: Americans' views of current economic conditions and whether they think the economy will get better or will get worse. The index has a theoretical maximum of +100 -- if all Americans rated current conditions as excellent or good and thought the economy was getting better -- and a theoretical minimum of -100, if all Americans rated current conditions as poor and thought the economy was getting worse.
  • Thus, even with the recent improvement, Americans are still more likely to view the economy negatively than positively overall.
  • For the week ending Nov. 16, 24% of Americans described the economy as "excellent" or "good," while 31% said it was "poor." This results in a current conditions score of -7 -- down slightly from the previous week's -5.
  • Americans' outlook on the economy, meanwhile, reached its highest mark in 2014 so far and the best since last June. Forty-six percent of Americans said the economy was getting better while 50% said it was getting worse, resulting in an economic outlook score of -4. This is a six-point increase from the previous week.
  • In the U.S., Gallup's Economic Confidence Index averaged -8 for the week ending Nov. 9. This is the highest weekly average found since the week ending June 30 of last year, and continues the upward trend in confidence that began in late September.
  • Prior to late September, the weekly Economic Confidence Index had been largely stable in 2014, averaging -16 and ranging narrowly between -13 and -21. Since a-18 index score for the week ending Sept. 21, confidence has generally increased.
  • With the recent improvements, the index is now just five points below the -3 Gallup found at the beginning of June 2013, the highest weekly reading since daily tracking began in 2008.
  • The economic outlook score also increased, to -10, after dipping to -13 the week before. This was the result of 42% of Americans saying the economy was getting better, while 52% said it was getting worse. It is similar to the -11 found two weeks ago and is one of the highest economic outlook scores found in 2014.
  • Americans' economic confidence continues to improve and now has reached a level not seen since the summer of 2013, which was the best of the post-recession era. Falling gas prices in much of the country, reports of the strongest six months of economic growth in a decade, and additional positive employment figures and lower unemployment seen so far in 2014 could be major reasons for the recent improvement in confidence.
  • Should that encouraging economic news continue, it is possible that Americans will finally become more positive than negative about the nation's economy.

Credit Card Ownership Statistics

Source: CreditCards Category: Credit Card News
  • While credit cards are an important financial tool for the majority of Americans, the average consumer is choosing to own fewer of them.
  • To be sure, they're still found in most Americans' wallets. In September 2014, the Federal Reserve Bank of Boston published data from its 2011 and 2012 Surveys of Consumer Payment Choice and found that in 2012, 72.1 percent of consumers had at least one credit card.
  • More recent data suggests credit card ownership is dropping off among the young.
  • A Gallup survey conducted in April 2014 found that the average number of credit cards Americans say they carry is at an all-time low. According to the Gallup survey, the average number of cards owned by all Americans -- including those with no credit cards -- is 2.6. Among Americans with credit cards, the average number of cards owned is 3.7. The percentage of Americans who have no credit cards rose to 29 percent in 2014, up from 22 percent in 2008.
  • The western United States has the most college-age credit card holders, with 37 percent of students who live in the West and 30 percent of students who live in the Midwest owning credit cards compared to 27 percent of college students in the South and 26 percent of college students in the Northeast.
  • Americans tend to hold a variety of cards. According to the Federal Reserve Bank of Boston, the average credit card holder in 2012 had four: 2.4 general purpose cards, 0.2 charge cards and 1.5 branded cards (cards displaying a merchant's logo). Of the four credit cards held by the average credit card user in 2012, 2.3 earned rewards and 1.7 did not.