Category: Commercial Real Estate

Fed reports credit card balances continued to dip in November

Credit card balances slightly dipped in November, as the COVID pandemic fallouts continued, and with the government continuing to wrangle about a second round of fiscal stimulus measures.

Consumer revolving debt – which is mostly based on credit card balances – was down $700 million on a seasonally adjusted basis in November to $978.8 billion, according to the Fed’s G. 19 consumer credit report released Jan. 8.

In November, credit card balances were off 1% on an annualized basis, after October’s 6.7% drop, which came on the heels of September’s 3.2% annualized gain.

Total consumer debt outstanding – which includes student loans and auto loans, as well as revolving debt – continued to grow and rose $15.3 billion to $4.176 trillion in November, a 4.4% annualized gain.

Card balances had touched an all-time high in February 2020 before the coronavirus pandemic started impacting consumer spending and bank lending. They dipped below the $1 trillion mark in May, for the first time since September 2017.

The Fed also reports that interest rates on credit cards were at 14.65% in November, with the rates on cards that are assessed interest (since they carry a balance) at 16.28%.

See related: Paying with credit is getting more expensive in the pandemic

Consumers expect household spending to rise

Consumers expect their household spending at the median to grow 3.7% in the year ahead, the highest in more than four years – even though they don’t anticipate much growth in their income (2.1%) or earnings (2%) – according to the New York Fed’s survey of consumer expectations for November.

Moreover, they are less optimistic about their household financial situation in the year ahead, with more of them expecting it to decline, and fewer consumers expecting an improvement.

Even then, more respondents are optimistic about their ability to access credit in the coming year, expecting it will be easier. However, the mean probability of missing a minimum debt payment in the next three months rose by 1.6 percentage points to 10.9%. Even then, this is still below its 11.5% average for 2019.

Less cheer on labor market front

On the labor market front, more consumers expect that the U.S. unemployment rate will be higher in the year ahead, with the average probability of this outcome rising to 40.1% in November, from October’s 35.4%.

However, they were less pessimistic about the prospects of losing their jobs, with this probability down to 14.6% on average, from October’s 15.5% (but still above the 2019 average of 14.3%).  Those above the age of 60 and those without a college degree were more optimistic about holding on to their jobs.

The respondents were less likely to voluntarily leave their jobs, with the mean probability of this down 1.3 percentage points to 16.6% (a low for the survey). Those 60 and older were at the forefront of this decline. However, respondents on average were more optimistic about the prospects for landing a new job if they lost their current ones.

In the meantime, the government reported that the economy shed 140,000 jobs in December, and the unemployment rate remained at 6.7%. The jobs lost were mostly in the sectors hard hit from the pandemic, with closures impacting the leisure and hospitality sector, as well as private education jobs.

The retail sector added jobs to aid holiday shopping, mostly in warehouses (which benefit from e-commerce) and superstores.

Although average hourly earnings for private sector employees rose $0.23, this is mostly because of the loss of lower-paying jobs in the leisure and hospitality sector, which tilted the average wage for the employed workers to the upside.

In online commentary, Diane Swonk, chief economist at GrantThornton, noted, “The silver lining to a bad overall jobs report is that the losses were concentrated in sectors that are most sensitive to COVID. Many of those jobs will come back once we get to herd immunity. The challenge is getting there, given the slow rollout of vaccines and poor uptake in some areas.”

Given that it will take a while to more fully open the economy, she is in favor of “aid today and another tranche once the new administration takes office.”

See related: Second stimulus deal provides $600 per individual

Application rates for credit cards plunged on pandemic impact

The New York Fed also reported in its credit access survey, which is conducted every four months as part of its survey of consumer expectations, that most credit applications and acceptance rates fell sharply after last February. Mortgage credit was the exception to this.

For credit cards, the application rate was off a steep 10.6 percentage points since February to touch a survey low of 15.7%. This decline impacted all age groups and credit score categories. Applications for credit card limit increases dropped 6.6 percentage points to 7.1% between February and October, another series low since the survey began in October 2013. The decline was spread across all ages and credit score categories.

Consumers applying for credit cards were also subject to steep rejection rates, with this rate rising 11.6 percentage points from February to touch 21.3% in October. Those looking for higher credit limits also were rejected about 37% of the time, from about 25% of the time in February.

No wonder consumers said they were less likely to apply for a credit card or credit limit increase in the next 12 months, with these figures falling 36% and 34% on average since February 2020. Those with credit scores above 680 led this decline.

Source: creditcards.com

Amex Platinum temporarily adding $30 monthly PayPal credit

As 2020 ended, we left behind some challenging times – and some valuable credit card perks, like $20 streaming and mobile statement credits the on The Platinum Card® from American Express. (Both expired on Dec. 31, 2020.)

Fortunately, Amex hasn’t left Platinum cardmembers with nothing in the place of the expired perk. On the contrary, the issuer has added yet another exciting benefit.

See related: Amex adds Uber Eats Pass for Green, Gold and Platinum, Uber Cash credit on Gold

For a limited time, Amex Platinum cardholders will be able to enjoy a $30 monthly PayPal credit. While it’s less than the cumulative $40 in monthly streaming and mobile credits the issuer offered late last year, the perk still offers a great value and can be very versatile.

How the new PayPal credit works

Amex Platinum cardmembers will be able to use the new perk through June 30, 2021. No registration is required, and the credit will be applied automatically.

To use the perk, link your American Express Platinum card to your PayPal account and set it as the default payment method. Now, when you shop at eligible online merchants, you can select to check out via PayPal and get up to $30 credited back to you in your monthly statement. You’ll earn Membership Rewards points on this type of transactions as well.

Note, however, that peer-to-peer payments aren’t eligible for this offer, and you also can’t use it on gift card purchases or prepaid card reloads.

Receive up to $880 in credits with Amex Platinum in 2021

This perk is far from the first valuable credit offered on the Platinum card.

The credits on the Amex Platinum include annual Uber credits of up to $200 ($15 per month plus an extra $20 in December), an up to $200 airline-fee credit, up to $100 Saks Fifth Avenue credits per year, a $100 Global Entry or $85 TSA Precheck application fee credit every four years and a $100 hotel credit every time you book with The Hotel Collection.

The $30 monthly PayPal credit will be available through June – for up to $180 in PayPal credits in total.

The newly added limited-time perk brings the total credits you can receive from the Amex Platinum up to $880 in 2021 (if you only use the hotel credit once).

Considering the card’s annual fee is $550, you can get a lot of value from your Amex, especially if we get to see travel finally coming back this year.

Bottom line

The new $30 monthly PayPal credit on Amex Platinum may be less valuable than the discontinued $20 streaming and mobile statement credits, but it’s versatile and easy to use – PayPal checkout is available at thousands of online retailers, including major ones, such as Walmart, Target, Home Depot and others.

Coupled with other credits and perks the Amex Platinum offers, the new benefit drives up the value of the card, making it a travel credit card that’s worth it to have even in the times when travel is limited.

Source: creditcards.com

Why is a disputed collection account still on my credit report?

Reader Alesia writes, “I disputed a collection account from 2016 on my credit report with all three bureaus. Two of them deleted the account. However, Experian did not and the creditor has updated the date of collection to November 2020. Does this mean it will now stay on my report until 2027? And why did the two delete it and not the other? I still dispute the account. What can be done in these situations?”

When you don’t pay your credit card bill or loan payment on time, the creditor eventually declares it delinquent. And typically six months after the time you first stopped paying your dues, it will either write it off or send it to collections. If it’s the latter course of action, the delinquent account becomes a collection account.

Check out all the answers from our credit card experts.

Ask Poonkulali a question.

Each credit bureau has its own processes

Alesia, the three credit bureaus – Equifax, Experian and TransUnion – are all independent of each other and have their own processes. That’s why you rightly disputed the collection account with all three of them individually.

Equifax, one of the three credit bureaus, advises in online commentary, “It’s important to remember that disputing information with one credit bureau may not impact information on credit reports from the other two bureaus. Also, dispute procedures may not be the same at all bureaus, so be sure to follow the procedure with the bureau where you’re filing a dispute.”

When you file a dispute with a credit bureau, the bureau will contact the creditor and ask it to look into the information and check its records. The creditor then has a 30-day time frame to respond to the credit bureau with accurate information. If the creditor does not respond by this deadline, the credit bureau can then act on any information the consumer has provided to update the account or remove it.

It may be that the creditor did not get back to Experian in time with the relevant information, and the credit bureau did not make any changes on your account. Or it may not have responded to all three of them in time, and each then acted on its own information (each has its own input on your credit history) and processes in dealing with the account. It could also be that the lender did not provide the same input to all three credit bureaus, for whatever reason.

Also note that the coronavirus pandemic has upset these dispute investigation timelines, and the CFPB has even said it will be lenient in allowing the stretching of this time frame somewhat for lenders and credit bureaus that are looking into disputes.

See related: A collection agency is pursuing me for an old debt I don’t recognize. What to do?

Date of first delinquency is what’s important

Alesia, you report that the creditor updated the date of collection on the account with Experian to November 2020, whereas this collection account goes back to 2016. One important date related to delinquent accounts and collection accounts is the date of first delinquency.

This is the date on which the debt first went delinquent. The debt will be reported on your credit report for seven years after this date. In the case of a collection account, it will be on your credit report for seven years after it went into collection, which is typically six months after the date of first delinquency.

This means it will show on your credit report for up to seven-and-a-half years following the date of first delinquency. The creditor’s updating of the date of collection to November 2020 would mean there is a change to the date of last activity on the account. It does not change the actual date of first delinquency. So the debt will be reported through 2023 and not 2027.

See related: What should I do if my debt’s date of first delinquency is incorrectly reported?

You could initiate another dispute

The Fair Credit Reporting Act allows you to initiate a dispute with the credit reporting agency or the creditor that furnished the information to an agency if you don’t agree with what’s in your credit report. Alesia, you have gone through this process with all the credit bureaus, but you don’t agree with the result provided by one credit bureau.

You should contact the collection agency that provided the input to Experian to find out how this happened and see if you can sort out the issue. If there is a mistake it agrees to rectify with the credit bureau, don’t forget to get written input about the resolution for your records.

If that doesn’t work, you have the option of filing another dispute with Experian, and also with the furnisher of the information. Make sure to provide any additional and relevant information that could boost your case, such as updated credit reports from the other two credit bureaus.

If you don’t agree with the dispute resolution, you could also have a statement added to your credit report providing your account of the dispute.

Another course of action is to file a complaint with the CFPB, using its consumer complaint database. In case you don’t get a desirable outcome after all this, you  could even talk to a lawyer specializing in FCRA matters to get more detailed assistance on your particular situation.

Alesia, I hope the matter is ultimately resolved to your satisfaction!

Source: creditcards.com

Credit card industry trends to watch for in 2021

Each year, CreditCards.com asks the experts to predict what the credit card landscape will be like in the coming year.

Read industry gurus’ forecasts now and see what changes credit card issuers might have in store for 2021.

See related: Best credit cards of 2021

More flexibility in card offers

Steven Dashiell, credit cards expert for Finder, expects the exceptional welcome offers and expanded reward opportunities we saw throughout 2020 will continue into 2021.

“These card adjustments were a response to evolving consumer spending habits during the pandemic and I foresee these spending habits lasting well through 2021,” Dashiell said.

Nishank Khanna, chief financial offer for Clarify Capital, noted that consumers are spending more on essential goods than discretionary items, so credit cards will likely offer more benefits for groceries and home goods.

“We can expect to continue to see flexibility with card offers, with many card issuers providing cash back options and diverse opportunities for the cardholder to decide how she or he spends rewards,” Khanna said.

This move is especially important for consumers who are exploring the perks they can get as they battle the impact of lockdowns and travel restrictions.

‘Buy now, pay later’ options will be more in demand

Given the current financial climate, consumers have gravitated toward alternative payment methods such as buy now, pay later options, said Imani Francies, a financial expert at USInsuranceAgents.com.

These services allow consumers to make large purchases by paying only a percentage of the total cart amount – they are then expected to make biweekly or bimonthly payments until the entirety of the purchase amount is paid off.

But Francies warned that if this way of paying becomes too addicting, people may start using credit cards to keep up with their payment plans, which could hurt their credit scores and transform the buy now, pay later option into a negative experience.

contactless payment technologies, said Vince Granziani, CEO of IDEX Biometrics.

For example, biometric fingerprint technology allows the user to make touchless payments via a fingerprint stored on a credit card that is safe, secure and unique to that individual.

The global demand for biometric technology in the payments industry is robust and will accelerate as business returns to a new normal in 2021 and beyond, Granziani predicted.

In 2021 and beyond, biometric smart cards will also become increasingly necessary to combat payment fraud. These cards prevent hackers from stealing your PIN or fingerprint data since it’s all stored directly on your card.

Therefore, if anyone were to steal or attempt using your card, they couldn’t do it without your fingerprint to activate a transaction, Granziani said.

Biometric cards have multiple uses, capable of holding passports and driver’s licenses ­– even library cards and travel passes – while holding your payment details all in one place, he added.

See related: Credit card scams in the time of coronavirus

Increased transparency will be the name of the game

Charles Tran, founder of CreditDonkey, forecast that credit card companies will offer increased transparency in 2021.

Transparency has always been a significant factor in the financial industry and it’s becoming an essential point of focus considering the tough times we are in, so credit cards will have to offer simplicity and utility to stand out.

“This will include transparency in the reward systems, fewer hidden fees, complimentary credit score monitoring and easier rewards redemption,” Tran added.

See related: 2020 credit card fee survey – What happened to 0% balance transfer offers?

Issuers may get tougher on delinquent debtors

Adem Selita, CEO and co-founder of The Debt Relief Company, sees an unsettling trend happening with regard to cross-collateralization, a method lenders use to secure one type of loan with the collateral from another.

For example, if you bought a car from a credit union and didn’t keep up with the payments, the credit union could repossess the car to satisfy your loan.

Selita believes credit card companies will become more aggressive regarding credit card defaults – depending on how the economy unfolds in the intermediate term – and even add features like collateralization to use consumers’ funds to pay their delinquent credit card bills.

In addition, Selita said, an updated law that goes into effect in 2021 will allow debt collectors to contact debtors via social media channels, text and voicemail.

And although they are not allowed to use social media to harass debtors, Selita said it still amounts to “essentially stalking consumers behind on their credit card bills and in default.”

2021 will be a comeback year for credit cards

There will still be some pain in terms of delinquencies and difficulty accessing credit, but 2021 will be a comeback year for credit cards, according to Ted Rossman, industry analyst for CreditCards.com.

The news of an effective COVID vaccine bodes well for a return to travel, dining and other discretionary spending that is so important for credit card companies.

But the improvement won’t be immediate or evenly distributed, Rossman warned.

Unfortunately, many consumers will fall behind on their payments, especially as stimulus and hardship programs wear off.

Many banks are expecting delinquencies to peak around mid-2021, although there’s still a fair amount of uncertainty around that.

This trend should keep a lid on 0% balance transfers and access to credit for people with lower credit scores, but the rebound will mean more competition for people with high credit scores and incomes, Rossman predicted.

“We’re already seeing some of this with the recent Capital One Venture Rewards Credit Card bonuses, and in 2021 I think we’ll see even hotter competition for the most creditworthy applicants.” he said.

Start your journey to financial freedom

Whatever might happen in the credit card industry in 2021, if you and manage your credit well you will stay financially healthy.

Spend wisely, avoid opening new credit you don’t need, manage your existing debt and live within your means, and you’ll be on the road to financial freedom.

See related: Overcoming hardships by embracing financial independence

Source: creditcards.com