Wall Street Journal:

Co-branded and affinity cards have become too expensive as credit-card companies try to reduce expenses amid the surge in late payments and delinquencies by card users. Issuers usually pay partner firms or groups an upfront fee and percentage of profits throughout the term of the contract.

Banks also fund the bulk of rewards programs and maintain customer accounts.

The retreat by J.P. Morgan Chase’s unit is part of an effort to stem card-related losses that are expected to haunt the company for the rest of this year. Chase now has about 110 co-branded credit cards, down from more than 200, and expects to eliminate more cards this year.

The Starbucks Duetto card, offered with coffee company Starbucks Corp., generated lots of buzz when it was introduced in 2003 because customers could use it either as a traditional credit card anywhere or turn it into a prepaid card by loading money onto it and using it at Starbucks.

“It was difficult to get the type of scale behind the program that we wanted,” said Gordon Smith, who runs J.P. Morgan’s credit-card business. “It was innovative and creative, but if these cards are small, there isn’t much earnings power for the partner or the bank.”

Chase is keeping its most successful partner cards, including those offered with Continental Airlines Inc. and Marriott International Inc. The bank also recently entered a new card partnership with Hyatt Hotels Corp.

Last fall, Citigroup dropped a three-year-old Home Depot Inc. co-branded card called Home Depot Rewards that could be used anywhere. The card “didn’t resonate with customers as we had hoped,” said Bill Johnson, who runs the bank’s card-partnership programs. Instead, the bank is continuing to promote its private-label Home Depot card, which can be used only in Home Depot stores.

Citigroup also is wrestling with jeweler Zale Corp. over the terms of its credit-card contract. The bank has threatened to terminate the contract early unless the chain, hit hard by sluggish sales, pays Citigroup a $6 million penalty. The contract is set to expire next year.
For retailers, the loss of card partnerships means they must now find new ways to retain customers. In addition to Chase, Royal Bank of Canada also is breaking off its relationship with Starbucks for its Canadian loyalty card. A Starbucks spokeswoman said the company is planning to introduce a new loyalty program soon.

Smart Money:

Finance Charges, Interest-Rate Hikes and Notifications

• No rate increases for the first 12 months after opening an account.
• Rate increases can only be applied to new charges.
• Annual and application fees cannot exceed 25% of your initial credit line.
• No more double-cycle billing.
• A six-month minimum promotional-rate period.
• No more over-limit fees, unless the card holder opts in.
• No fees to make credit-card payments online or over the phone, unless you make a payment on your due date.
• Must give 45-day notice of pending rate or fee hikes or any other significant changes to credit-card terms.

Exceptions, Caveats, Loopholes:

• Rate hikes are allowed if you’re more than 60 days late with a payment.
• Some banks have already found a way around the rate-hike issue, by increasing card users’ regular interest rates to as high as 29.9% and then refunding a part of that rate for each month that the customer pays on time. 
• Double-cycle billing, although prohibited, can technically still exist for credit cards that don’t have grace periods. 
• Issuers have been calling consumers asking them to opt in for over-limit fees in exchange for lowering that fee, says Chi Chi Wu, a staff attorney with the National Consumer Law Center, a consumer advocacy group. What they’re not saying is that if people don’t opt in, the transaction will be denied and they will not be charged over-limit fees in the first place, Wu says.

Billing Statements, Payments and Disclosures

• Billing statements must be sent 21 days before the due date.
• Your due date should be the same date each month.
• Payments are considered on time when received by 5 p.m. on the due date or the next business day after a holiday or weekend.
• Payments above the minimum must be applied to the highest-rate balance first.
• Each monthly statement must include information on how long it would take you to pay off your balance if you make minimum payments only and the total you’ll pay, including interest and principal; and how much you need to pay each month in order to pay off your balance in 36 months and the total you’ll pay, including interest and principal.
• Statements must also include a warning that by making only minimum payments you will pay more interest and it will take you longer to pay off your debt, as well as a toll-free number to call if you want to be referred to a credit-counseling service.

Exceptions, caveats, loopholes:

If you make a purchase under a “deferred-interest” plan (such as “No interest for six months,” for example), the company may let you choose to apply extra amounts to the deferred-interest balance. Otherwise, for two billing cycles before the end of the promotional period, your entire payment must be applied to that balance. Carrying a “deferred-interest” balance is a risky proposition altogether, says Wu: Unless the balance is paid in full over the specified period, the company will charge all interest retroactively once the promotional rate expires. “We think deferred-interest plans should have been banned,” Wu says.

College Students and Young Adults

• No credit cards for college students unless co-signed by a parent or they can demonstrate “ability to pay.”
• No credit-limit increases if you are under 21 and have a co-signer without that co-signer’s permission.
• No credit-card marketing and freebies on college campuses.

Exceptions, Caveats, Loopholes:

• Issuers will likely start appealing to parents to co-sign their children’s credit cards. And the Federal Reserve has specified that issuers have the option of keeping the parent on the hook even after the young person turns 21, Wu says. “If that younger person keeps the credit card for 20 years, the co-signer is liable that whole time.”
• Issuers are not allowed to give out freebies for signing up for a credit card on or near a campus — which still allows them to set up shop near popular off-campus venues and offer freebies to everyone, whether or not they apply.

Yahoo AP:

That helps explain why the industry reacted so aggressively to the legislation. Among the moves it made:

– Resurrected annual fees.

Annual fees, common until about 10 years ago, have made a comeback. During the final three months of last year, 43 percent of new offers for credit cards contained annual fees, versus 25 percent in the same period a year earlier, according to Mintel International, which tracks marketing data. Several banks also added these fees to existing accounts. One example: Many Citigroup customers will start paying a $60 annual fee on April 1.

– Created new fees and raised old ones.

These include a $1 processing fee for paper statements for cards issued by stores such as Victoria’s Secret and Ann Taylor. Another example is a $19 inactivity fee Fifth Third Bank now charges customers who haven’t used their card for six months.

Other banks increased existing fees. JPMorgan Chase, for instance raised the cost of balance transfers from one card to another to 5 percent of the transfer from 3 percent.

– Raised interest rates.

The average rate offered for a new card climbed to 13.6 percent last week, from 10.7 percent during the same week a year ago — meaning cardholders had to pay almost 30 percent more in interest, according to Bankrate.com.

For millions of other accounts, variable interest rates that can rise with the market replaced fixed rates. The Fed is expected to start raising its benchmark interest rates later this year, which would likely trigger an increase on those cards.

Besides making credit more expensive, banks also made it harder to get and keep credit cards. One big reason: Since the financial meltdown, many credit card issuers have been trying to reduce risk.

The number of Visa, MasterCard and American Express cards in circulation dropped 15 percent in 2009, for example. Rarely used cards were among the first cut off. Some cards linked to rewards programs for purchases like gasoline were likewise shut down.

Card companies also slashed credit limits for millions of accounts that remain open. About 40 percent of banks cut credit lines on existing accounts, according to the consultant TowerGroup, which estimated that such moves eliminated about $1 trillion in available credit. Much of that was unused.

Credit lines were frequently cut in regions most affected by the housing crisis and high unemployment, such as Florida and California, said Curt Beaudouin, a senior analyst at Moody’s Investors Service. “They’re not doing it willy nilly, they’re doing it systematically,” he said.

The Latest Credit-Card Tricks

Under the new rules, companies will find it difficult to jack up fixed-interest rates at will. That’s why issuers are moving consumers into variable-rate cards, which are tied to an interest-rate index. But borrowers may not benefit when the index drops since companies are limiting how low card rates can go. In October consumer advocate attorney Lauren Bowne saw the 5.9% promotional rate on her Wells Fargo (WFC) card switched to a variable one with a minimum rate of 19.1%. As of July, 5 of the 12 largest banks that issue cards, including Wells, had floors under rates, says Pew Charitable Trusts, a nonprofit. Wells says floors under variable rates have been standard practice for at least three years.

What can consumers really do?  Everything the banks are doing is legal even if it is not fair.  All the credit card companies can increase your rate, decrease your credit limit, or cancel the card altogether.  I guess depending on your personal situation is will determine what options will be most beneficial to you.  I think this article in the Denver Post is a good example of consumers getting fed up.

Denver Post:

To see how it is playing out in millions of homes across America in advance of the act’s Feb. 22 effective date, you need only to sit across the breakfast table of Lawrence Rickman in the modest Louisville ranch home he built four decades ago, where he and Margie Mae raised five children.

He is 81 now, seven years his wife’s senior. They have had a Bank of America credit card for 20 years. They never once in all that time, both say in near unison, missed a payment.

Rickman slides his December bill across the table, with instructions to read it. No, not all of that, he spits, a Pall Mall cigarette hanging on one side of his mouth. Look at the interest rate, he says.

Sixteen-point-nine percent, it reads.

“I was paying 5.9 percent, which is what I have paid for years,” he says. “I always paid them $500 a month without complaint. Now, they want $1,074 this month. I can’t pay it. I won’t pay it.”

A Bank of America spokeswoman declined to comment, saying the company does not comment on clients’ credit dealings.

The couple survives almost exclusively now on Social Security payments. Until his retirement more than 20 years ago, Lawrence Rickman was the streets superintendent for the city of Louisville.

“I laid the first blacktop in this city,” he says.

The credit card is the only one they hold. He’d wanted to simplify his retirement years, which is why he and Margie Mae reverse-mortgaged their home in Old Town. In recent years, all they used the card for was gasoline, some groceries and the occasional doctor bill.

“When I got this month’s bill,” Lawrence Rickman recalls, “I got on the line and told them they were getting out of hand on this interest rate, that I wanted to negotiate.”

The conversation, he says, went something like this:

“Lower my rate, or I’ll file bankruptcy,” he told them.

“But sir, if you do, it will destroy your credit rating.”

“So what? I’m almost 82 years old, and you’ve already ruined my credit.”

The bank, he says, called back days later with a proposal: If he makes five payments at the current rate and does not use the card during that time, maybe a lower rate can be negotiated.

“I told them to shove it,” Lawrence Rickman says. “What difference does five payments make? I’ve never once missed a payment, and now they don’t trust me? They had no answer to my question.”

He and Margie Mae have retained a lawyer to assist them.

“I am at the point of saying to hell with it,” he says. “They can’t file a lien against my wages; I don’t have any. They can’t come against my house, which is owned now by the federal government.”

The December payment was due Tuesday. He looks at Margie Mae and softly says it will be the first payment they will miss.

She is going to miss having the card, she tells him. He slides the card out of his wallet, telling me to take a good look because he’s set up the shredder in a back room. “Member since 1989,” it reads.

“They can squeeze, but they’ll never get blood out of me,” Lawrence Rickman says, fingering the card wistfully.

“What the hell,” he says, looking up from the card. “Maybe I’ll go get one more tank of gas with it.”

Reuters: U.S. credit card charge-offs resume climb

Most U.S. credit card companies reported that charge-offs rose in November after two months of declines, showing that consumers remain under stress and sending shares down industry wide.

In a regulatory filing on Tuesday, Citigroup Inc (C.N), the largest issuer of MasterCard-branded credit cards, said charge-offs — loans the company does not expect to be repaid — rose to 10.29 percent in November from 8.79 percent in October.

It was the largest increase among the biggest credit card issuers, but not the only one.

JPMorgan Chase & Co (JPM.N), the biggest issuer of Visa-branded credit cards, said charge-offs rose to 8.81 percent from 8.02 percent, and Capital One Financial Corp (COF.N) said its charge-off rate went up to 9.60 percent from 9.04 percent.

Discover Financial Services (DFS.N) said its default rate rose to 8.98 percent from 8.54 percent.

The reports ended a short relief of two months when charge-offs declined, helped by tax refunds and economic stimulus actions.

“American consumers are still hurting, and especially coming into the Christmas season,” said Ken Crawford, senior portfolio manager at Argent Capital Management.

How are some banks able to reduce overall delinquency vs other banks when the unemployment rate applies to all of them? Simply some banks tell a story, while others tell the truth.

I know banks have not increased business or revenues in this economy, nor have they reduced net losses.  I just hope that President Obama and Congress doesn’t bail them out again using taxpayer money when they come back asking for another bailout.  These insolvent banks need to be taken over by the FDIC and  restructured accordingly.

Since the video appeared, our lawmakers have passed laws to regulate credit card interest rates and fees from being raised without notice.  This in turn have forced the banks and credit card companies to preemptively raise rates and fees before the law takes effect.  They (visa, mastercard, discover, and american express)  have also found a loophole that allows them to avoid the law by simply changing all fixed rate credit cards now to variable interest rate cards.  You will notice many statements you now receive with little credit card inserts with terms of agreement updates.

DEBTORS REVOLT BEGINS NOW!

And from this video, I think many others may be following suit. Youtube has many other users from middle America also posting similar frustrations and anger against their creditors. They seem to be taking the same action.

Re: DEBTORS REVOLT BEGINS NOW!

Re: DEBTORS REVOLT BEGINS NOW!

Kill Bank of America

BofA: Bend Over America

debtors revolt-my first video

There are many more videos on youtube you can watch.  I think this reflects the attitude of many Americans in today’s economic environment.  During these bailouts, banks received 0% interest rate loans from the taxpayers and they turned around and started raising interest rates to 19.99 to 29.99 and possibly higher rates.   What would happen if everyone simply stopped paying all their credit cards at the same time?

Nasdaq:

Consumer data collection firm TransUnion reported Monday that credit card delinquencies fell in the third quarter of 2009, the first time that had happened.

Typically, says TransUnion spokesman Clifton O’Neal, delinquencies rise in the third quarter – which the company defines as the period between July and September – due to vacation and back-to-school spending. But that trend was bucked this year as consumer sentiment shifts. People are using cards more wisely and paying down debt, a sharp reversal from the widespread profligacy of recent years.

Consumers’ change in attitude was reflected by both average borrower debt and the card delinquency rate: average debt declined to $5,612 from $5,719 in the previous quarter; delinquencies fell 5.98 percent from the second quarter to 1.10 percent of accounts outstanding.

That was the third quarter they made those claims on.  Then in October they mysteriously went up after “people became wise using credit cards and started paying down debt”.  Ha ha.  Sorry, I work in collections and know the real story behind credit card delinquency getting better despite unemployment getting worse. This report is more accurate and closer to the truth.

Nov. 23 (Bloomberg) —

U.S. credit-card delinquencies climbed last month to the highest level since February as five of the six biggest card lenders posted increases, Moody’s Investors Service said.

Loans at least 30 days overdue, a signal of future defaults, rose to 6.12 percent in October from 5.97 percent in September, Moody’s said in a report dated Nov. 20 and distributed today. So-called early-stage delinquencies, payments 30 to 59 days late, were unchanged at 1.66 percent.

Banks typically write off card loans after 180 days, and defaults fell last month to 10.04 percent from 10.72 percent in September, reflecting lower delinquency rates earlier in the year. Credit-card defaults and delinquencies tend to track U.S. unemployment, which climbed to 10.2 percent in October, the highest since 1983.

“Weak job creation, elevated bankruptcies and rising unemployment continue to weigh on results,” John McDonald, an analyst with Sanford C. Bernstein & Co., said in a Nov. 17 research note. “It still feels too early to declare victory.”

Write-offs may peak at 12 percent to 13 percent in 2010, Moody’s analysts Will Black and Jeffrey Hibbs said in the report.

JPMorgan Chase & Co., the biggest U.S. card lender, as well as Capital One Financial Corp. and Discover Financial Services this month posted October data that included their highest delinquency rates for 2009. American Express Co., the top performer this year in the Dow Jones Industrial Average, was the only of the six that didn’t report a rise in delinquencies.

As far as American Express bucking the delinquency trend, I will bet they are cooking their books.  Who are they trying to fool?  Oh yeah, their investors. They are not immune to a bad economy and high unemployment.  They just have more aggressive loan mitigation techniques that allow them to  re-age their credit cards to a current status with just one token payment regardless if you are 6 months past due.