A proposed change to regulations that could force banks to add more fees to consumers' accounts will be reviewed by a Congressional committee in February.
Part of the House Financial Services Committee will meet on February 17 to discuss the Federal Reserve Board's proposed cap on what banks charge to retailers for processing debit card transactions, according to the committee's website. The rule would limit this fee to 12 cents per transaction, which critics say would cost banks billions in revenues every year. As a result, these shortfalls could be passed on to consumers in the form of greater fees.
This is just one of several topics the Financial Services Committee will review in the coming months.
"The Committee will be busy this year addressing the issues of concern to Americans: jobs, economic activity, Fannie and Freddie reform, and implementation of Dodd-Frank," Bachus said. "We will work to ensure that taxpayers are protected. This hearing schedule is tentative but is intended to inform Americans on the issues the Committee will be tackling."
Already, some in Congress have vowed to repeal laws that helped consumers better deal with credit card debt, as viewed by some to be too limiting for businesses.
Charge offs – credit card debt so behind in payments that lenders deem it uncollectable – declined once again in December, to 8.03 percent, according to the latest monthly statistics from Moody's Investors Service. That marked a significant drop from November's rate of 8.58 percent. On a year-over-year basis, December's total was 22 percent lower than the one observed in the same month of 2009.
"The current low level of delinquencies, the improved credit profile of trust collateral pools resulting from weaker borrowers charging-off, and the expectation for receivable balances to begin to climb as the year progresses, will collectively place continued downward pressure on the charge-off rate well into 2011," said Moody's assistant vice president and analyst Jeffrey Hibbs.
In addition, early stage delinquency – credit card debt 30 to 59 days behind – fell to 1.05 percent, the lowest total ever, the report said.
Those in the industry view delinquency as a strong indicator of trends for charge offs. Declines in one are usually seen in the other within a few months.
Industry experts expect that Apple will introduce its anticipated iPhone 5 and iPad 2 later this year, and with them the devices are likely to implement near-field communications systems that allow users to load their credit card or bank information onto the devices, according to a report from Bloomberg News. Because of this technology, owners would be able to wave their devices in front of a sensor to make a credit card purchase.
Currently, though, it's not known exactly how this system would work, the report said. There is speculation that Apple is enacting it to save money on interchange fees it pays to lenders when consumers use their credit card to make a purchase in iTunes. By deducting directly from a bank account, the system could save the computer giant millions of dollars a year.
A number of companies will likely get into the mobile payments industry in 2011, as forecasts show that it could be worth up to $44 billion in the next four years.
While many consumers have made a greater effort to swear off credit card use over the last several months, one major lender saw a huge increase in profits due to increased spending in the fourth quarter.
American Express enjoyed an income of $1.1 billion in the fourth quarter of 2010, up 48 percent from the same period the year before, thanks largely to increased profits from credit card spending, according to its latest regulatory filing. Its U.S. Card Services segment alone posted an income of $701 million in the three-month period, an increase of 70 percent over the 2009 figure, as consumers spent more on their cards.
"With cardmember spending up 15 percent this period, we reached all-time records for the quarter and the full year," Kenneth Chenault, American Express chairman and chief executive officer.
In addition, the company saw a 68 percent drop in losses to defaulted credit card debt, which tumbled to $111 million from $346 million the year before.
Many consumers are getting a better handle on their credit card debt by making more regular payments into their accounts and spending less in general.
While federal regulations have made it more difficult for credit card lenders to alter rates and fees for consumer accounts, they left rules for business accounts relatively untouched.
As a result, credit card lenders are expected to increase the number of credit card offers sent to small business owners to increase significantly in the coming year, according to a report from the Los Angeles Times. These accounts would still be able to have their rates or fees altered with little or no notice, and lenders see this as a better way to drive revenues than trying to navigate consumer regulation.
"You are going to find a real effort on the part of card issuers to look at this as an opportunity to grow credit cards outstanding at fairly significant interest rates," David Robertson, publisher of the Nilson Report, told the newspaper.
In addition, lenders may still be wary of lending to consumers because of historically high default rates observed in the last few months, as they have less recourse for penalizing these borrowers for delinquency.
ImageCredit: Freedigitalphotos.net by Dundee Photographics
You might remember my post from November “Whomp!” about changing our get-out-of-debt tactics. Desperate for some forward progress, I disregarded my budget, and took a large payment from a client and applied it directly towards debt. Yes, it felt good to make progress. But oh man, did I pay for it.
Well, yes, as predicted, my plan backfired.
One of my clients pays out regularly, a massive check, so I started making that my debt repayment check. Lesson learned: I shall now budget it to be that, and not just apply it willy-nilly.
You see, after applying November’s check (October’s invoices) I mailed my November 31st invoices as per schedule. Completely forgetting that Big Client in question requires additional documentation for the invoice to be paid.
Additionally, with the Christmas holidays, many of the check-signers in companies that I regularly work for were on vacation, so my regular income was almost entirely delayed by 10 days or more. I’m still waiting on much of December’s income.
I went through the whole last half of December under budget by about $3,900. Youch! That hurt!
We re-established holiday spending plans to an even more frugal plan than originally, and I did penance for not planning my budget to meet cash-flow needs. (Oh, and I’ll never again forget to send my biggest client their additional documentation for the invoice—which should be paid sometime this week).
The lesson?
Stick to your plan, no matter how tempting it is to throw it out the window! There’s nothing quite as terror-inducing as knowing there’s only $3.00 left in your bank account!
What does budget triage look like?
We had to do some triage in December. Some things just didn’t get paid. (Like debt). We made room by cutting back budgeted items, even returning some items in favor of less-costly gifts. I set aside Medical bills that could be paid 30 days late without consequence, and stalled on everything else until the end of the grace period to get payments in from clients. The household necessities were paid out of my husband’s regular income. Sometimes, self-employment is a b#*)%. That said, I’m not re-joining the rat-race anytime soon. I’ve just got to learn better self-employment cash flow strategies.
Overall, nothing went into default or accrued late charges with the possible exception of a late charge on our internet bill. Everything else got paid at the end of the grace period, or minimums only, and has been caught up this month, from December’s income that arrived in January.
The last word.
I won’t do that again. From now on out, the budget is gospel.
Greater effort from the banking industry to foster adoption of mobile credit card payments is likely to cause the systems to gain traction among consumers this year.
A number of major financial institutions and mobile phone service providers are going to put more work into promoting the adoption of so-called mobile wallet systems that allow consumers to make a credit card transaction using their smartphones, according to a report from CNN Money. While the practice may not gain widespread popularity in 2011, the groundwork is expected to pay off significantly in the next few years.
Currently, the mobile payment industry makes credit card lenders next to nothing, but the industry could be worth as much as $22 billion by 2015, the report said. Phones with near-field communications chips capable of completing such a transaction are expected to be made more widely available this year.
However, a number of studies have found that the majority of consumers are a bit wary of the systems' security. The more accepting shoppers are those from younger demographics.
While many consumers may enjoy using their debit cards to make purchases because doing so doesn't result in any additional debt, some banks would like to limit that practice in the coming year.
Consumers are expected to be faced with more fees on their debit card accounts in the coming year as banks try to recover profits lost to federal regulation, according to a report from the New York Daily News. However, another possible reason for this is to persuade consumers to begin using their credit cards again if they hope to avoid increased costs for maintaining checking fees.
One of these expected changes is the reintroduction of the minimum account balance requirement, the report said. With this, if a consumer makes too many purchases and slips below a predetermined amount in their checking account, they could be hit with a big penalty fee.
The Federal Reserve Board recently announced that it was considering a limit on debit card transaction fees of just 12 cents, as opposed to the current industry standard of 1 or 2 percent of a purchase's total value.
It always hits me (and the kids) this time of year. The inevitable I’m bored feeling. The sky is gray, the house is gray, everything is cold and damp and nobody feels like doing anything.
So here in the great Pacific Northwest, a common way to deal with this is to spend our winters at the movies. We Northwesterners love the movies.
In the past twenty-three months of trying to get out of debt, I think I’ve been to the movies four times. Typically on gift cards or part of somebody’s birthday celebration.
For those of you just starting out on the debt free journey, you’ll find insufficient entertainment funds to be a problem at some point or another. I promise.
Here’s 10 fun ideas that might help out.
- Netflix. Get yourself lost in a series (or ten) that are major time sinks. Glee, Eureka, Heroes, whatever your thing is (I happen to know I love anything that Netflix has tagged “quirky”). Extra budget credit if you cut your cable and go Netflix only. (I did!)
- Board games. Yes, I’m serious. There’s some really good ones out there. My family is currently hooked on Bananagrams and a few card games intended for families with math-learners at home. Sleeping Queens is a favorite math card game. We’ve also gone back to the Hoyle manual and learned a bunch more traditional card games.
- Geocaching. If you haven’t tried this, it’s fun and practically free. Most modern mobile phones have some kind of GPS locator that can be used. You’ll want your raingear (or snow gear) but if you’re like me, you can handle some weather in the name of adventure.
- Search out free entertainment. Check the library, local universities, community arts newsletters and more for free lectures and exhibitions. Many local museums also have a “free first Tuesdays” or a “pay as you’re able” day.
- Consider a membership. This year, we were gifted a family membership to a zoo and aquarium. This zoo has an outdoor zoo, large inside nature area, and aquarium and a very, very large playground. We can pack a picnic lunch and make a day of it. Oh, and the parking is free. It would have been well worth it if I’d just bought the memberships in the past. I think in the future we’ll alternate park membership—this year the zoo and aquarium, next year the science center, etc. That way we won’t get too tired of any one park.
- Church. Yes, I’m being serious. As we’ve gotten more involved with our church, we’ve found many opportunities to serve and have fun. From making dinner for the homeless shelter, to enjoying discounted or free organ concerts, we’re enjoying our time and serving or community.
- Volunteer. Walk dogs at the animal shelter, do laundry at the senior center or wash dishes for the soup kitchen. You’ll be surprised at what you learn from those around you. I’ve also found that it helps me to stop that feeling like I need to be keeping up with the people around me. Being around those less fortunate than I helps me to be less of the spoiled brat that got me into this situation.
- Build your side hustle. Build up some cash to get out of debt with.
- Take a class. Free classes are available online at udemy.com. Ever want to learn Welsh? Now’s your chance!
- Mentor others. You won’t be doing this for long before you have others approaching you asking you to help them get out of debt. Save some time to mentor friends and family in the ways of living debt free.
The number of notifications that could lead to foreclosure for homeowners in Minnesota hit a record high of 71,665 in 2010, up eight percent from 2009's total of 66,570, according to a study by the Minnesota Home Ownership Center, which used data compiled by the state's Homeownership Advisor Network.
"While we are seeing signs that the housing market may be stabilizing, these numbers show that Minnesota is not out of the woods yet and that tens of thousands of Minnesota families are still facing their own personal foreclosure crisis," Ed Nelson, marketing and communications manager for the Minnesota Home Ownership Center, said.
The year's busiest period was the third quarter, when 18,982 notices were sent to state residents, the report said. However, that slowed considerably in the final three months of the year, when 17,270 were mailed.
Many consumers have struggled to pay their monthly mortgage bills and faced foreclosure as a result of the still-elevated national unemployment rate.
