Debtmerica Debt News

Consumers still relying heavily on rewards credit cards

Thursday, 17 May 2012 11:00

Since the end of the recession, many Americans have been shy about taking on credit card debt, but in many cases, those who do are now doing so through the use of rewards accounts.

Though attitudes toward credit card borrowing have changed considerably in the last few years, rewards accounts remain extremely popular with both banks and consumers, according to the latest monthly Cardbeat report from Auriemma Consulting Group. Credit card issuers are now extending more offers for these accounts than they were a year ago, and many consumers who have them enjoy using them on a regular basis.

About 80 percent of those polled who had rewards cards used them more often than their other accounts, the report said. Further, 82 percent said they had actually redeemed the points or miles they racked up on the accounts, and 93 percent said they had positive experiences in doing so.

However, consumers should also be aware that carrying a balance on a rewards card tends to be more costly than doing so on more traditional accounts because these cards tend to come higher interest rates, meaning overspending on these cards might eventually require the user to seek some debt relief options. Add a comment

Capital One sees fewer delinquencies, more defaults in April

Tuesday, 15 May 2012 13:00

The way in which consumers handled their credit card debt issued by one of the nation's top lenders was a bit of a mixed bag in April.

The latest regulatory filing with the Securities and Exchange Commission by Capital One Financial shows that while the company once again saw instances of credit card payments that were 30 days or more behind on payments slipped once again last month, it also saw more significantly late accounts that had to be written off as uncollectable, according to a report from Dow Jones Newswires. Capital One said its 30-day delinquency rate fell to just 3.18 percent of all accounts, down from 3.25 percent in March.

On the other hand, it also saw charged off accounts rise to 4.07 percent of balances, up significantly from the 3.85 percent seen the month before, the report said. In recent months, the company had largely been seeing improved credit quality from its lending portfolio.

In general, fluctuations in the delinquency rate are usually observed in those for defaulted accounts several months down the road, but both are signs that consumers might need a little bit of debt relief. Add a comment

CFPB still pushes for heftier credit card disclosures

Friday, 11 May 2012 13:00

The federal agency tasked with helping protect consumers from troublesome loan agreements and credit card debt is still focused on making contracts for cards easier to understand.

Even as the federal Consumer Financial Protection Bureau has tackled a number of other credit-related issues facing Americans, it has not forgotten its task of simplifying credit card fee and rate disclosure documents, according to a report from Dow Jones Newswire. A number of prototypes for such agreements were introduced soon after the CFPB gained full regulatory power, but the agency has also turned its attentions to other matters.

"My view continues to be that the consumer ought to be able to read the contract and we can ... create a document that is [binding]," Marla Blow, assistant director of card markets for the Consumer Financial Protection Bureau, said during a recent presentation, according to the news agency.

Clearer understanding of the terms of the accounts they are signing on to may be a boon for consumers, and could lead to fewer needing to seek significant debt relief measures as a result of extremely strained finances. Add a comment

Consumers carrying far more credit card debt in March

Wednesday, 09 May 2012 13:00

On a year-over-year basis, the amount of credit card debt carried by consumers increased significantly, reversing months of downward trends.

The amount of credit card debt held nationwide surged in March, rising 7.8 percent on an annual basis, to a total of $803.6 billion, according to the latest monthly statistics from the Federal Reserve Board. That's the largest total seen this year, and, despite declines in both January and February, more or less returned consumers to the levels seen at the end of last year, when they owed $803.8 billion. However, that total is still well below the all-time high of nearly $989.1 billion observed in December 2008.

Borrowing on other non-mortgage installment loans, like education and auto financing, also increased in March, the report said. It rose 11.3 percent year-over-year to nearly $1.74 trillion, and has continued to rise significantly in every month so far this year.

Consumers who take on more in outstanding balances they can afford to pay back may end up having to seek out a number of debt relief options to keep themselves from running into significant financial problems. Add a comment

Consumers could return to tapping credit card debt in next five years

Monday, 07 May 2012 13:00

In the last several years, the nation's top lenders have seen consumers' attitudes toward credit card debt change considerably as a result of the economic downturn, but some expect borrowers to start moving toward their old habits in the next few years.

Between 2007 and the end of 2012, the amount of revenues enjoyed by credit card lenders is expected to have fallen by an average of 4 percent annually, to a total of $50.8 billion, according to new data from the industry research firm IBISWorld. This was the result of a large number of economic conditions, including lower employment rates, falling home values and tighter lending standards, as well as increased regulatory control over the lending industry. Altogether, these led consumer to rely less on revolving credit - that is, debt carried over from one month to the next - and higher rates of consumer delinquency and default. Currently, those two concerns alone absorb a total of 26.3 percent of lenders' revenues, though that's down from the high observed in 2009, at the height of the recent recession.

But now new statistics have shown that consumers are once again returning to using their credit cards to make everyday purchases again, though they are approaching it differently, the report said. Now, they make sure to pay off their bills on-time and in general are keeping balances low enough that they can pay them off in full at the end of every month. Whether that trend continues remains to be seen, but IBISWorld projects that credit card lenders will see increased revenues over the next five years through the end of 2017.

This will likely be for two reasons, the report said. First, lenders are generally increasing the value of rewards accounts that draw consumers in to borrowing more and - as a result of higher interest rates on these accounts - can generate more revenues. And second, experts predict there will be a huge surge in the use of mobile and online purchases in consumers' day to day life that will likewise lead to an increase in transactions as borrowers move away from using cash.

Consumers who have struggled with high balances in the past and sought debt relief as a result may not be as eager to return to their old borrowing habits, but improving personal and economic conditions might prompt them to do so. Add a comment

Can misreported credit lead to need for debt relief?

Monday, 07 May 2012 13:00

Consumers who are struggling with large amounts of credit card debt and other outstanding balances have enough on their plates without worrying about the state of their credit reports when mistaken entries wind up there.

In many cases, consumers might have inaccurate information on their credit reports, which can have a negative impact on their financial standing, as a result of what are known as "mixed files," according to a report from the Columbus Dispatch. For instance, consumers may have data for not only themselves, but also family members, neighbors, consumers with similar information such as names or Social Security numbers, and even those with no similarities, on their credit reports.

Further, it can be difficult to clear these up because the burden of proof that a person is not responsible for the account on their credit report is on the consumer, the report said. Therefore, it can often be difficult to compile evidence of this.

Mistaken entries on a credit report can lead to many financial hardships, including the necessity for debt relief if there is an account they just can't clear from their records. Add a comment

Americans happy to deal with credit card debt

Thursday, 03 May 2012 13:00

When it comes to dealing with the companies that control their credit card debt, most Americans are pretty happy with their experiences.

About two-thirds of all consumers who posted comments about their dealings with credit card lenders online said they were left satisfied with their experiences, according to new data culled by the social networking data firm DigitalMR. The other one-third were unhappy with their experiences.

Of all the nation's nine largest credit card lenders, American Express engendered the most positive experiences, the report said. It not only had the highest net sentiment score at 63 percent, but also had 35 percent of all positive comments in the entire industry. However, U.S. Bank wasn't far behind in terms of customer service with a rating of 61 percent.

Having good customer service experiences might be helpful to consumers who are working hard to find some amount of debt relief from their lenders. For instance, it might allow them to work out a reasonable repayment plan if they can't afford their monthly bills, or negotiate a lower interest rate. Add a comment

Credit card debt and other financial concerns still plague many Americans

Wednesday, 02 May 2012 13:00

Though the economy has been steadily improving for more than a year now, millions of Americans are still struggling financially and many feel they need significant amounts of debt relief and other assistance to get their lives back on track.

Many consumers are still trying rebuild their finances as a result of hardships faced during the recent recession, but now more are at least recognizing that they're having a significant amount of difficulties in dealing with their finances, according to a new survey from the National Foundation for Credit Counseling. After completing a 10-entry true/false quiz designed to illustrate signs of extreme financial difficulty, any one of which could be a sign that they needed significant help, 80 percent of consumers said they were in need of a "major overhaul." Another 13 percent said they could use a tune-up.

"This statistic parallels the findings of the recent NFCC Financial Literacy Survey in which 80 percent of adults indicated they could benefit from additional advice and answers to everyday financial questions from a professional," said Gail Cunningham, a spokesperson for the NFCC. "It is encouraging that people recognize how perilous their financial situation has become. Now they need to take action to resolve the problem and keep it from spiraling out of control."

Among the entries on the quiz were a number of questions related to consumers' handling of their credit card accounts, the report said. One led consumers to question whether their outstanding balances were growing every month, while another brought up whether those whose accounts were approaching their credit limits were applying for new cards to stay afloat financially. Others dealt with regularly making late payments - and skipping them altogether some months - or being pursued by debt collectors after bills went unpaid for several months.

Millions of Americans still struggling with credit card debt may find that it's not easy to get their finances back in order, but doing so is crucial to not only their financial health, but in many cases, also their happiness. Making sure to have all payments to credit card and other lenders sent in on time and in full is the most important aspect of a consumer's credit score, and the amount being borrowed versus the total overall limits is another major concern. Add a comment

Consumers still not taking on much credit card debt

Tuesday, 01 May 2012 13:00

Though the economy is generally improving and consumers may be feeling better about their personal finances, statistics indicate that many are still a bit wary of taking on credit card debt.

Consumer spending grew 2.9 percent in the first quarter of 2012, and though that's the fastest pace seen in more than a year, it seems that relatively little of that was actually the result of increased credit card spending, according to a report from the Associated Press. In fact, data from the Federal Reserve Board shows credit card purchases slipped in value by more than $5 billion between January and February.

Further, the Fed noted the amount carried on consumer credit cards overall totaled just $799 billion in February, the report said. That total was some 15 percent below the high seen in December 2007, the first month of the recent recession.

Since the recession hit, many consumers may have sought some sort of shelter from the high cost of credit card borrowing, including looking for debt relief, scaling back spending, or cutting it out altogether. Add a comment

Reading fine print can help consumers, if they can understand

Monday, 30 April 2012 12:00

Consumers who want to avoid making serious missteps when it comes to dealing with their credit card debt and other types of credit would likely do well to take the time to read the fine print of their lending agreements.

Experts say that taking the time to read a lending agreement will give a consumer far more insight into the true cost of their account, and therefore those who might be struggling financially would likely benefit from taking the time to review their accounts in this way, according to a report from Bloomberg News. To that end, the federal Consumer Financial Protection Bureau has begun rolling out simplified lending agreements for a number of types of credit.

However, some note that these don't go far enough, the report said. For one thing, they're not mandatory, and in many cases, they also do not mandate the use of plain language, only a clearer disclosure of costs.

Consumers seeking debt relief may want to consider the importance of closely reading any new lending agreement they are about to enter into to make sure they fully understand what the true cost will be. Add a comment

Consumers continued to use credit cards more often last year

Friday, 27 April 2012 13:00

Americans may now be feeling better about dealing with credit card debt and using their accounts responsibly now that the economy has made continual improvements over the last year, and that prompted many to increase spending and obtain new cards.

The amount of credit, debit and prepaid cards carrying the brands of the world's six largest payment processors surged 12.4 percent to a total of more than 6.54 billion last year, as consumers continue to feel better about their financial standing, according to the latest Global Credit Card Brands study from the Nilson Report. In addition, the number of transactions processed on these cards rose to 135.33 billion in 2011, up 14.56 billion and 12.1 percent from the year before.

However, at the same time, credit cards issued to U.S. consumers bearing the Visa, MasterCard or American Express brands generated 36.78 percent of all transactions worldwide, the report said. That's down from 37.65 percent in 2010.

Many Americans are trying to find debt relief and being more cautious about adding to their balances, keeping the value of their purchases over the course of the month low enough that they could pay their bills off in full. Add a comment

Many want to find debt relief, rebuild their credit scores

Friday, 27 April 2012 13:00

Millions of consumers across the country are still dealing with large constraints such as significant amounts of credit card debt, but more now recognize some of their biggest problem areas when it comes to managing their money and financial lives correctly.

More than half of consumers - 56 percent - say that they believe their biggest financial problem area, and the one in which they could use the most help, is knowing what it takes to improve their credit score, according to a report poll from the National Foundation for Credit Counseling. Problematically however, while many recognize that their credit scores can play a significant role in all aspects of their personal financial life, they don't do enough on their own to make sure they're in good standing. Most respondents said they hadn't checked their credit report at any point in the last 12 months, but only 5 percent said they thought they needed help understanding the information contained in thedocument.

This type of disconnect indicates that consumers simply might not know that the information on their credit report is what's used to comprise their score, NFCC spokesperson Gail Cunningham said. That's why experts usually advise that it takes ordering a credit report to understand what's wrong with a credit score.

But consumers weren't only concerned about their credit standing, the report said. Another 23 percent of those polled said they think their biggest problem area is that they need to get their spending under control, and another 11 percent said they would like to have a better grasp on how to put more money into savings. Experts say that these two types of behavior combined can lead to serious financial problems because stretching budgets thin with overspending, and having nothing to fall back on in the event of an emergency, can lead to massive balances that can be difficult to get under control again.

Consumers who run into large amounts of credit card balances and other bills often find themselves in need of debt relief. Since the end of the recent recession, however, many consumers have been conscientious in their efforts to pay down their debt and make sure they don't carry a balance from one month to the next. Add a comment

Americans struggling with credit card debt still slow to forgive lenders

Thursday, 26 April 2012 13:00

Millions of Americans are still working to find debt relief and get out from under the burdens of the credit missteps they may have made in the past, and that has likely prevented them from generally feeling good about their lenders.

Credit card lenders are the companies that consumers are least likely to forgive when they have a bad customer service experience, likely owing to years of acrimony built up during the recent recession, according to the latest annual Forgiveness Ratings issued by the Temkin Group. The company reviewed customer sentiment for 18 industries, and credit card issuers ranked the lowest by far, with just 13 percent of consumers willing to forgive their lender for a bad customer service experience.

However, it should also be noted that as the economy improves, so too has consumer sentiment toward these companies, the report said. Though only 13 percent of consumers said they'd forgive their lender, that's more than four times greater than the 3 percent who responded similarly last year.

Consumers may be feeling better about their lenders because their personal economic situations are improving and they're getting a better handle on paying down their credit card debt. Add a comment

Lenders still targeting college kids with marketing despite laws

Wednesday, 25 April 2012 13:00

In the past few years, a number of laws have been passed to help protect consumers from carrying more credit card debt than they can afford. But one group that was supposed to have been specifically safeguarded might not be receivingthe security intended.

Young adults under the age of 21 were supposed to see their protections increased under the Credit Card Accountability, Responsibility and Disclosure Act, but it seems that hasn't entirely been the case, according to a new study from Professor Jim Hawkins of the University of Houston Law Center. Among the findings of the study are that 68 percent of college students under the age of 21 have received direct credit card offers in their own name by mail in the past 12 months, and 40 percent reported seeing college students given gifts in return for signing up for credit cards, though this practice is expressly prohibited by the Credit CARD Act. Further, 27 percent of those under 21 said they were able to list their student loans as income in an attempt to qualify for a card in their own name without a co-signer.

Another area of concern the study highlighted was the relationship between colleges or associated groups and lenders, the report said. Hawkins examined 300 such marketing agreements from both 2009 and 2010 and found that about 64 percent of these documents were unchanged from one year to the next despite the Credit CARD Act taking effect early in 2010. Many of these deals were terminated, but only two specifically listed the regulation as the reason for it being shut down.

"If Congress was concerned about people under 21 receiving credit card offers in the mail, it could directly prevent that conduct by making it illegal to mail anyone under 21 a credit card offer," Hawkins said. "Similarly, if Congress was concerned about abusive terms in the agreements between credit card companies and colleges, it could directly forbid those abusive terms instead of just requiring companies disclose the agreements."

Consumer advocates have noted that credit cards can be particularly troublesome for college students because it might prevent them from being able to gain financial independence after graduation, and could lead to their needing significant debt relief down the road. Add a comment

Debt collection firm taking heat for hospital presence

Wednesday, 25 April 2012 11:00

The Minnesota Attorney General's office has filed a lawsuit against debt collection agency Accretive Health for failing to protect hospital patients' confidentiality and not disclosing its full role in hospital care to patients.

The lawsuit says that the company put some of its employees in hospital emergency rooms and looked to demand payment of past bills before any new treatment was given.

Employees also allegedly used patient health records to push for the collection of overdue accounts regardless of credit card debt or other needs patients had. Those overly aggressive debt relief methods might be a violation of privacy laws.

"The debt collector found a way to essentially monetize portions of the revenue and health care delivery systems of some nonprofit hospitals for Wall Street investors, without the knowledge or consent of patients who have the right to know how their information is being used and to have it kept confidential," said Attorney General Lori Swanson.

After the release of the data by the Minnesota AGs office, the New York Times reported that Accretive had contracts with some of the largest hospitals in the country, meaning the issues may be widespread. Add a comment

Women tend to make more credit card debt mistakes

Tuesday, 24 April 2012 13:00

When making efforts to deal with credit card debt responsibly, it seems women might have more difficulties than their male counterparts.

Women tend to make a larger number of mistakes when dealing with their credit card balances than men do, including carrying balances from one month to the next and not comparison shopping when seeking a new account, according to new data from FINRA. In all, 60 percent of women said they carried a balance regularly, 9 percent more than men. Moreover, 42 percent of women made a habit of making only the minimum payment to their lender every month, compared with 38 percent of men.

Further, when it came to looking for a new card, just 31 percent of women compared a number of accounts to find the best deal possible, the report said. Perhaps as a consequence, women tended to face higher interest rates on their credit cards than men did, regardless of their financial literacy.

Consumers who face higher interest rates may be more likely to run into rapidly-expanding balances if they don't pay their bills in full every month. This may require them to seek debt relief as they attempt to get their finances in order. Add a comment

Could traditional card use be usurped by mobile payments soon?

Wednesday, 18 April 2012 13:00

The way in which consumers currently deal with credit card debt could soon become a thing of the past.

A recent poll of experts found that 65 percent believe mobile wallet technology - in which payments are completed with near-field communications-enabled smartphones - will become so ubiquitous within the next few years that it will have largely supplanted traditional credit card use and even cash by 2020, according to new research from the Pew Internet and American Life Project. However, another 33 percent say that consumer's concerns about the privacy and security of their payment data will prevent this technology from becoming too popular.

Already, a number of companies are developing and pushing their own mobile platforms and it's expected that a larger number of smartphones will come with the necessary NFC technology embedded within the next year or so.

The financial management tools that may come standard with a mobile wallet program - such as the ability to track spending and move funds around with greater ease - may actually be helpful in allowing consumers to avoid borrowing too much, and possibly even help them find some debt relief. Add a comment

College kids struggle to get control of credit card debt

Monday, 16 April 2012 13:00

Despite recent laws designed to prevent young adults from running into credit card debt, it seems college students haven't been doing enough on their own to find debt relief.

Today, 70 percent of undergrads and 96 percent of graduate students have at least one credit card in their own name, and few know how to properly manage their accounts, according to a study entitled Financial Literacy and Credit Cards: A Multi Campus Survey, published in the International Journal of Business and Social Science. About 36 percent of college kids have two or more credit cards in their name.

Just 9.4 percent of those polled said they pay their balances off in full at the end of every month, and very few actually knew the cost of their accounts, the report said. Only 14.6 percent knew the interest rate on their card, while 24.3 percent and 29.2 percent claimed knowledge of their late payment and over-balance penalty fees, respectively. Altogether, only about 10 percent said they knew all three.

The Credit CARD Act requires consumers under the age of 21 to either obtain an adult co-signer on their account or provide proof they can afford a credit card on their own. Add a comment

Consumer credit card debt expected to increase throughout 2012

Thursday, 12 April 2012 13:00

Americans have been far more conscientious about their attempts to avoid falling behind on their credit card debt in the past few years, and that trend is expected to continue throughout the year even as balances grow.

Consumers' credit quality will likely improve this year, as charged off credit card accounts are expected to drop by between 15 and 20 percent to a new total of just 4.5 percent of all balances, according to new data from Moody's Investors Service. However, this rate of improvement is well below the one seen last year, when defaults dropped 40 percent.

And even as more consumers find debt relief by making increased payments and dodging charge offs, it's also believed that balances will continue to grow as card use expands, the report said. While in many cases consumers have switched their habits so that they use their cards but pay off their balances at the end of the month, it's believed debt totals will increase some 5 percent by the end of the year.

Consumers have been far more conscientious about paying off debts in recent years, but experts say both balances and defaults must hit bottom and begin growing again at some point. Add a comment

Consumers continued to slash credit card debt in February

Tuesday, 10 April 2012 12:00

While consumers continue to feel better about their finances and the economy in general, many seem to still be cautious about once again dealing with credit card debt.

The amount of money being borrowed on credit cards nationwide slipped once again in February, this time falling to a total of $798.6 billion from January's total of $800.8 billion, according to the latest monthly statistics issued by the Federal Reserve Board. That's a decrease of 3.3 percent, following January's slightly larger drop of 4.4 percent from December's total.

But at the same time, borrowing increased overall once again, as consumers continued to tap lenders for financing on nonrevolving credit - that is, installment loans for things like auto financing and education costs, but not including mortgages, the report said. In all, this type of borrowing rose 7.7 percent in February, to a total of more than $1.72 trillion.

Experts had noted that increases in consumers' borrowing on credit cards seen at the end of last year bucked recent trends toward trying to find debt relief, but also cautioned that it was likely the result of many using their cards to finance their holiday shopping. Add a comment

Consumers doing a better job making payments on time

Friday, 06 April 2012 13:00

The rate at which consumers fell behind on their outstanding credit card debt and other balances slipped in the fourth quarter of last year, as consumers were once again more conscientious in their efforts to reduce debt.

Delinquency rates on outstanding balances across eight different loan types slipped to 2.49 percent in the final three months of 2011, from 2.59 percent at the end of the third quarter, according to new data from the American Bankers Association. That is the lowest rate for loan balances 30 days or more past due since 2008.

Meanwhile, delinquencies on credit card balances slipped once again as well, to 3.17 percent from the previous quarter's 3.25 percent, the report said. That is the lowest total seen since 2001.

Since the end of the recent recession, consumers have changed their borrowing habits considerably and are now far more likely to seek debt relief and avoid carrying a balance from one month to the next. However, some experts caution that delinquencies will soon bottom out, meaning they may increase again toward all-time historic averages. Add a comment

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