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News Scan Sep 2012

Credit Card News, Economy News, Banking Industry News - Sep 2012
Sep 2012
  • With the first anniversary of debit card swipe fee reform approaching next week, U.S. retailers and their customers are benefiting from savings of up to $18 million a day that previously went to card companies and the nation’s largest banks.
  • Merchants haven’t necessarily labeled the savings from reform as a ‘debit discount’ but they have nonetheless found a variety of ways to pass the value along to their customers.
  • Retailers are simply too competitive not to share savings with consumers because customer value is one of the key ways they take market share away from their competitors.
  • Prior to reform, debit card swipe fees cost retailers and consumers $22 billion a year in 2010, according to a Report, a newsletter that tracks the card industry.
  • At that level, the fees drove prices up an average $192 a year for each of the nation’s 114 million households.
  • Nonetheless, NRF is not satisfied that retailers have been able to pass along as much savings as Congress intended, and is scheduled to be in court next week to seek a further reduction in the fees.
Sep 2012

College students shedding cards

Source: creditcards Category: Credit Card News
  • College students may be getting smarter about personal finance but it took a big shove to get them moving in that direction.
  • According to a July 2012 study, the percentage of college kids with credit cards has dropped over the past two years.
  • The study included a survey of about 1,600 undergraduates and parents of undergraduates.
  • It found that the greatest decrease in credit card ownership happened among sophomores, whose ownership rate dropped from 41 percent in 2010 to 28 percent in 2012.
  • Juniors saw a substantial decline as well. The senior class showed a modest 3 percent increase in card ownership levels the only class to see a rise since 2010.
  • The seniors can brag to the freshman class, however, that they have smaller outstanding credit card balances: seniors average $515 while freshmen average $642.
  • According to the survey, one-third of student credit cards had zero balances and 41 percent of balances were less than $500.
  • The decline in the number of students with cards follows passage of a 2009 credit card reform law, which made it harder for students to get credit cards, and the recession, which did the same for everyone.
Sep 2012

Checking Account Fees Continue to Climb: Poll

Source: Americanbanker Category: Banking Industry News
  • To avoid a monthly fee, bank customers must maintain an average balance of $723 in their non-interest checking accounts, up 23% from 2011 and the highest balance in 15 years.
  • The average monthly service fee on non-interest checking accounts rose 25%, to $5.48, also a record, the review of 477 checking accounts at 247 institutions finds.
  • In all, 39% of non-interest checking accounts surveyed are available to all customers free of charge, down from 45% last year and below the peak of 76% set in 2009.Banks have upped automated teller machine and overdraft fees as well.
  • Checking accounts that are free on a standalone basis continue to diminish. But a free checking account is still within reach of the majority of Americans, whether by getting the fee waived through direct deposit or moving to a bank or credit union that still offers free checking.
  • Customers whose accounts fell below their bank's average minimum monthly balance paid fees ranging from an average high of $33.60 in Denver to $28.35 in San Francisco.
  • The rising fees may test customer loyalty. Overall, 72% of customers say they would consider switching lenders if their financial institution hiked its fees on checking accounts.
  • Among Americans who earn at least $50,000 a year, 81% say they would consider switching lenders in the event of a fee increase.
  • Though many of the nation's biggest banks have boosted checking account fees in recent months, others have held steady and some have even changed their minds and lowered prices.
Sep 2012
  • U.S. companies borrowed more in August than a year ago to spend on new equipment, but are still holding on to cash because of global economic and regulatory concerns.
  • Companies took on $6.9 billion in loans, leases and lines of credit to fund equipment purchases in August, up 21 percent from $5.7 billion a year earlier and up 5 percent from July's $6.6 billion, the industry group said.
  • The financing was for goods such as industrial equipment, computer systems and office furniture.
  • Despite the higher spending trend, which reflects improvement in economic sectors including housing and mining, the group said companies remain cautious and are mainly replacing aging equipment.
Sep 2012
  • Western Union and MasterCard have announced that all cardholders with MasterCard rePower-enabled prepaid cards issued by any bank in the U.S. can now reload their cards at more than 45,000 Western Union Agent locations in the United States.
  • Before you can use a prepaid card to shop online or pay bills, you must first be able to add funds to it.
  • And it is easy to find a Western Union location and have the funds available almost immediately.
  • Just visit your neighborhood Western Union location and you leave with the funds conveniently loaded on your prepaid card.
Sep 2012
  • For the first time since the recession, there’s potential for rising U.S. property values to boost consumer spending and give the economy a nudge.
  • Housing’s so-called wealth effect has been a drag on household purchases since 2008.
  • A projected 2 percent gain in home values next year will start to lift consumer spending in the second half of 2013.
  • Wealth effect will add 0.1 percentage point to spending per quarter, swinging from a 0.9 percentage point drag at the height of the housing crisis in the first quarter of 2009.
  • The contribution represents a long-awaited turning point at a time when a struggling labor market impedes wage growth and manufacturing provides less support for the three-year expansion.
  • There are a lot of encouraging signs in the housing market. It will still be a gradual recovery unless you see the overall economy turn stronger.
Sep 2012

Banks Can Make Small-Dollar Credit Products Work

Source: Americanbanker Category: Banking Industry News
  • An estimated 15 million Americans turned to small-dollar credit products in 2011. These individuals used payday loans, pawn loans, direct deposit advance, auto title loans and nonbank installment loans in order to obtain quick access to cash.
  • Yet, these types of credit often come with high fees and challenging repayment terms (such as two week balloon payments) that make it highly unlikely the loans will be repaid without significant difficulty.
  • As a result, many borrowers rollover or extend their loans multiple times, finding themselves in a cycle of repeat usage and mounting debt.
  • The lack of safe, affordable, high quality small-dollar credit options – and other solutions that will solve the problems for which people currently turn to credit – is a major pain point for underserved consumers.
  • But meeting this need with high quality advice, products and services is also a significant business opportunity.
  • Fees paid to access these small dollar credit products in 2011 amounted to $17 billion. This is revenue that should be shifted toward products and services that meet the need for credit in a way that aligns provider and customer success and builds economic opportunity for consumers – rather than seeing those opportunities stripped away.
  • Developing the innovative new products and services that are necessary to meet this goal will not be an easy effort. Listening to the experiences of these individual borrowers is the right place to start.
Sep 2012
  • The poverty rate in the United States stabilized in 2011 for the first time in three years even as incomes fell and inequality grew.
  • The share of people living in poverty edged down to 15 percent from 15.1 percent in 2010.
  • Unemployment benefits helped soften the blow from a harsh economic environment, the report said.
  • All told, 46.2 million Americans lived in poverty last year, little changed from 2010.
  • But the share of aggregate income declined for Americans in the middle while those in the top 5 percent increased their share by 4.9 percent.
  • The median U.S. household income declined by 1.5 percent to $50,054 in 2011.The poverty threshold for a four-person household is about $23,000.
Sep 2012

Community Banks Fill Void in Correspondent Lending

Source: Americanbanker Category: Banking Industry News
  • Several large and midsize banks are scaling back or getting out of correspondent lending business, leaving a void for smaller banks to fill.
  • In recent months a number of community banks have been hiring lenders and contacting smaller banks that need lines of credit, mortgage servicing or foreign exchange services.
  • Correspondent banking remains a tricky and risky business, but a growing number of bankers believe it can be lucrative.
  • ServisFirst's correspondent lending division became profitable five months after it opened for business in March 2011.
  • Some of the success can be attributed to the retreat of several regional and large lenders, which got out because of liquidity risk and lender-specific regulatory constraints.
  • Lenders such as Citigroup, Bank of America, Ally Financial and PHH have reduced their correspondent lending portfolios in the past year.
  • Those moves have opened the door for smaller lenders such as BOK Financial Mortgage and more.
Sep 2012

Consumer credit card balances fall again

Source: Creditcards Category: Credit Card News
  • Consumer credit card balances fell for the second straight month in July. Total consumer credit also declined, breaking an 11-month streak during which it steadily rose.
  • The Federal consumer credit report, showed a steep 6.8 percent drop in revolving debt as consumers remained reluctant to overcharge. Both households and lenders are still on the cautious side.
  • It seems that consumers just don't want to run up these big credit card bills long-term. However, they're not going to run up big balances that take long to pay off.
  • Revolving debt, which in the report is made up almost entirely of credit card debt, fell by $4.8 billion in July to $850.7 billion.
  • Overall consumer credit the combination of both revolving and nonrevolving debt fell, by $3.3 billion. That decline brought total consumer credit to $2.7 trillion.
Sep 2012

Latino Market Holds Key for Credit Issuers

Source: Mediapost Category: Credit Card News
  • The growth in the Latino market helped moderate what would have been an even more significant drop over the 5% decline in the total number of credit card-owning Americans during the 2004-2011 period.
  • More than 14 million Latinos own credit cards, accounting for 10% of all consumers who have or use them.
  • Credit card use among Latinos is often associated with affluence. One-third of Latinos using credit cards to pay their bills have a household income of $75,000 or more.
  • Proportion of credit card-holding Latinos will gradually return to pre-recession figures to eventually total 18 million by 2017.
  • The number of Latinos with debit/ATM cards more than doubled between 2004 and 2011, increasing 115%.
  • In contrast, non-Latinos with debit/ATM cards increased only 51%. Today, 21 million Latinos own debit/ATM cards, representing 14% of consumers of the total.
  • Latinos with debit/ATM cards will increase until it more closely matches the percentage of non-Latinos with debit cards. By 2017, 26 million Latinos will be debit card owners.
  • While Latinos represent a bright spot for credit and debit cards, they are the only source of light for prepaid cards.
  • Between 2011 and 2012, Latinos drove all of the growth in prepaid card use. Packaged Facts further reveals that almost 5 million Latinos used a prepaid debit card in the last 12 months, accounting for 15% of all consumers using these cards.
Sep 2012
  • Automakers turned in their best August since before the 2007-09 recessions, with U.S. monthly auto sales rising 20 percent from a year ago as consumers with aging vehicles showed more confidence in buying big-ticket items on easier credit terms.
  • Big sales gains were achieved by Japan's Toyota Motor Corp and Honda Motor Co. All three Detroit automakers increased August sales.
  • Total sales for the month were 1,285,202 vehicles, according to Autodata Corp, the highest monthly sales figure for any August since 2007, when 1.47 million autos were sold in the United States.
  • The reason for the improvement is that consumers are feeling better about making big-ticket item purchases.
  • The auto sales pace last month was the latest sign suggesting consumer spending fared better early in the third quarter after weak consumption held back economic growth to a 1.7 percent annual pace from April through June.