Credit Card Affairs Blog

The makers of FICO have always been ridiculously secretive about their little formula but now they finally have disclosed part of their calculations. Check out the link below to see how some common credit mistakes might affect your score. Not surprisingly, bankruptcy is pretty much the worst thing you can do for your credit rating. You can expect to lose up to 240 points if you have to file bankruptcy.

CreditCards.com: FICO reveals how common credit mistakes affect scores.

Any person who applied for their first credit card in the 1980s or earlier will tell you that credit cards were much harder to get and offered very few of the perks we take for granted today. With the economy still sluggish and a more tightly regulated credit card industry, could we see a return to more modest credit cards? Many experts seem to think so:

"We are going to see attempts to limit the rewards," at least in the short term...
regulations will probably lead to less lucrative rewards programs in due course."

If you've been looking to get a new card, now is probably a good time to apply, but remember to look out for those high annual fees that are starting to become more common these days.

Wall Street Journal

The government just announced that we have a 10% unemployment rate and recovery seems to be sluggish at best. Yet, analysts over at Bank of American think that losses from credit cards have reached their peak, mainly due to a slight drop of the charge off rate in September. However...:

Most U.S. credit card companies reported defaults fell in September from record highs as consumers used tax refunds and other economic stimulus proceeds to lower debts, but late payments rose, suggesting more troubles ahead in an already battered industry.

Most sectors are talking about the worst being over these days, but I'm not sure if that applies to the credit card industry. If the unemployment rate starts to decline within the next couple of months we might see an improvement in the industry, but if high unemployment persists it'll be a whole different story.

Source: ABC News

For anyone who's every been a member of a credit union this won't be a big surprise, but everyone else might just wonder why they've never even considered joining one. I don't know if it's the lack of advertising or the lack of conveniently located branches in high profile areas, but to anyone who's fed up with their bank's exorbitant fees credit unions might be the right alternative. Even the corporate greed worshipers over at Forbes can't deny the appeal of credit unions:

...interest rates for credit cards issued by the nation's 12 largest credit unions were 20% lower than those for bank-issued cards

The credit unions studied charged a high of 13.75% interest on cash advances, versus as much as 21.24% by banks.

13.75% APR for cash advances?! Sign me up. Search for your local credit union at CUNA

While most of the article deals with credit card issuers and regulations in the UK, the author makes some interesting points.

One cannot help thinking that we may have already seen the peak of the credit card market. Prepaid cards, debit cards and the likes of PayPal are steadily gaining market share and if the faithful credit card loses some more of their allure the trend may continue.

...There is a market for the credit card but it looks likely to get smaller.

Maybe we really have seen a peak in the credit card market. It's not realistic to expect that people will just keep getting more and more credit cards. Of course, this doesn't necessarily apply to all markets. In some countries, credit cards are really just taking off. I don't think that debit cards or prepaid cards are really taking away too much business from the credit card companies. After all, credit cards offer a lot more flexibility and rewards.

BBC News: What's the future for credit cards?

Visa just announced that they made a $514 million profit in the last quarter. Payment volumes are still down but the number of cards and transactions are up.

The chief executive, Joseph W. Saunders, said Visa was beginning to see signs of stabilization that appeared to reflect early signs of economic recovery.

Wanna tell that to all the unemployed people?

NYT: Debit Card Use Helps Visa Post a Profit

Many of us feel like we've been raped by our credit companies... slashed credit limits, high APRs, rude customer service and the list just goes on and on. We fully understand the current market conditions and realize that some issuers are running out of options, but that doesn't mean that they should punish good customers.
Our friends over at Yahoo have compiled a list of credit cards that are more consumer friendly and as far as we can tell they've picked some obscure but interesting cards:

Despite a $35 annual fee, for a low rate it's tough to beat Iberia's Visa Classic cards, with a purchase rate fixed at 6.5%, compared with a national average of about 13%. Farm Bureau Bank's no-fee Platinum MasterCard currently carries a low, 5.24% variable rate.

Those rates are incredibly low. Leave a comment if you have one of these cards. Check out the link after the jump for the entire article and some more cards with reasonable rates.

The current state of the economy may worry credit card issuers, but MasterCard and Visa seem to be completely isolated from all those bad news. Both companies don't actually issue cards so they don't have to worry about consumers defaulting. Should some people stop using credit cards, MC&V would still make plenty of money thanks to the ever-growing debit card market. In fact, despite a recent $500 million anti-trust settlement, MasterCard shares shot up by nearly 10 percent yesterday.

Until recently, many economists predicted that by early next year the economy would turn a corner and start to recover. However, this is no longer the case as some fear that the worst is yet to come. So far, credit card issuers have not experienced a meltdown, but delinquencies have been rising steadily and may reach record highs next year. Some issuers expect record losses in 2009. Thanks to the $700 billion bailout we probably won't see any large credit companies fold. Let's hope for the best.

WSJ

Battered by the mortgage meltdown and a shrinking economy, credit card issuers are aggressively tightening their lending standards. But what exactly are they doing?
1. Sending out fewer card offers. Only people with very good credit are getting offers these days. Got a few blemishes on your credit - you might be out of luck.
2. Fewer 0 percent APR offers. People have been using these offers to pay off their debt, but as more and more people are defaulting it no longer makes sense for banks to offer these kind of terms.
Check out the rest of the list here