Thursday, April 13, 2017

House of Credit Cards

Rising credit card charge-offs pose $1 trillion question 

To be clear, this doesn’t signal imminent collapse by any means. Loss and delinquency rates are still relatively low, but the consumer weakness is a new dynamic after years of households paying down debt and saving their money. It’s concerning that so many people are failing to pay their bills when the economy is supposedly accelerating.

It’s especially worrisome that credit card lenders are still aggressively trying to rake in new business. They want consumers to borrow more — even if that means that more customers end up getting in over their heads — as long as it means they get bigger interest rates and more revenue that offset increasing losses. This will only make the lenders and, more importantly, the consumers more vulnerable when the economy starts to contract.

What do you mean? All I've been told is the horizon looks good, and even better with bu$ine$$man Trump in charge. 

So who brought this about?

"Banks are issuing credit cards like it’s 2007" by Deirdre Fernandes Globe Staff  October 27, 2016

Americans are binging on credit cards like it’s 2007.

For years consumers have been shredding their plastic, banks have been reining in lending, and debt-phobic millennials have been paying their bills with debit cards. Now, credit cards are back.

So far this year, banks have issued new credit cards at a rate unseen since before the 2008 financial crisis, which triggered an avalanche of bad debt.

Meanwhile, the card rewards wars are heating up. 

Can't swing a dead cat without.... sigh.

Banks and financial institutions are piling rewards onto their credit card offers, hoping to lure consumers, especially the affluent and middle-class.

What middle class?

Tim Kolk, owner of TRK Advisors LLC, a credit card consulting company in New Hampshire, said, “Everyone who wants a credit card has one, so it’s about stealing other people’s business.”

Many banks are eager to push credit cards as a healthier economy prompts Americans to spend more, low interest rates dampen bank profits on other loans, and more careful borrowers stung by the recession have kept credit card loan delinquencies at their lowest rate in 25 years.

Through July of this year, banks issued nearly 39 million credit cards, a 16 percent increase from 2015, and the highest level in nine years, according to Equifax Inc.

As banks compete with each other, some investors and shareholders are worried that these rewards may be getting too rich, eating away at profits, and that consumers may soon reach their limit on debt, triggering bad times once again.

They just had one of the best quarters ever.

“We’re seeing an arms race among issuers,” said Matt Schulz, a senior industry analyst with the consumer website “These balances can’t keep growing forever without some difficulties arising from them.”

But for now, the benefits attached to opening a new credit card are proving to be too enticing for many.

Jon Strauss, 40, of North Andover couldn’t resist.

He got a Barclays card.

In August, New York-based JP Morgan Chase & Co. introduced its Sapphire Reserve credit card, with 100,000 points, the equivalent of $1,500 toward airfare, hotels, and other travel, if the borrower charges $4,000 within three months. The card has a steep $450 annual upfront fee, which can be reduced with the card’s $300 reimbursement for travel-related charges.

The card went viral and the bank hit its full-year adoption goals in the first two weeks, with the much-sought-after millennials making up a large share of new card holders, according to Amy Bonitatibus, a spokeswoman for Chase.

Just add it to the student debt.

The bank has even tapped late-night television show host James Corden for a series of videos pitched to younger travelers. Other financial institutions are offering richer cash back rewards, including Illinois-based Discover Financial Services. The enticements are working.

For the large banks that dominate the market, the credit card business can be lucrative. While new banking rules put in place following the financial crisis restrict overdraft revenue and cut into swipe fees for debit cards, regulators didn’t put as many fee limits on credit cards.

The income banks earn when consumers swipe their credit cards at retailers grew by more than 50 percent, from $18.5 billion in 2009 to $28.1 billion last year. Debit card swipe fees grew at about half that pace and overdraft fees fell by 12 percent during that period, according to Mike Moebs, owner of Moebs Services Inc., an Illinois-based bank consulting firm.

The number of credit card payments that are 30 days late hit 2.2 percent in the second quarter of this year, down from a peak of 6.8 percent in 2009 and among the lowest levels since the Federal Reserve started keeping track in 1991, making credit cards a safer bet for banks.

But as banks push credit cards, they are also preparing for potential losses. Chase, for example, set aside 13 percent more for losses in its most recent earnings report, compared with the same time in 2015.

That doesn't look like a $afe bet!!!

Bank of America is debating how to increase its card business, while focusing rewards on customers who already have other accounts with the bank, said David Tyrie, who oversees consumer products.

I'm Stumpfed.

They are “really about the relationship,” and I $uppo$e it is ju$t their way of $aying they love you.



"A former county employee in Arkansas has been arrested after prosecutors accused her of using a county credit card to buy about $200,000 in personal items including Arkansas Razorbacks tickets and a tuxedo for her dog...."

Put her to sleep.

Then there is your medical debt.


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