Credit Cards » Credit Card News » Visa Commercials Promote Debit Cards
Date April 29, 2009

Visa Commercials Promote Debit Cards

Visa has noticed the trend of increased debit card use during this recession. They’re running several TV ads that promote Visa debit cards for everything from buying pizza, going to an aquarium with your daughter on a Tuesday, and paying for products online.

On April 29th, Visa Inc. reported that their branded debit card total dollar volume of purchases surpassed credit card purchases for the first time during the last three months of 2008 – making the debit card transactions processed by Visa 50.4% of their total transaction volume in the same period.

It’s no mystery why consumers are turning to debit cards over credit these days. Consumers are becoming more conscious of their spending, and people don’t want to rack up any more credit bills if they can help it. Debit cards are popular over cash use, because American consumers have a preference for the convenience plastic provides – beginning in 2003, credit and debit card purchases bypassed cash and check purchases.

“A big group of consumers like the discipline that debit spending can bring them, and that is particularly relevant in this kind of environment,” said Tim Murphy.  Murphy looks after MasterCard Inc.’s main payment products.

Unlike credit cards, which allow consumers to charge more than they can afford to pay when the statement comes and carry the balance from month to month, debit cards only let you spend what you have in your checking account. A Nilson Report provides data for the increase of debit cards since 1987:

nilson

Banks are helping to encourage debit card use through the offering of rewards programs. While debit card rewards programs are not as generous as most credit card programs – it’s still a good incentive that helps people choose debit over credit. Credit card use is expected to decline even more, as Americans continue to monitor and rein in their spending habits.

Date April 25, 2009

Canadians Looking to New Credit Card Rules, Too

Americans aren’t the only ones dealing with credit card problems. While President Obama met with executives from flagscard issuers including American Express Co. and Bank of America Corp. to review credit-card policies for fees and interest rate limits, the Canadian government Prime Minister Stephen Harper is responding to consumer groups and lawmakers who insist the banks should have lower rates, and more information for consumers for understanding how the credit cards work. Namely, consumers should know clearly what their interest rates are, and not be faced with interest rate increases for unknown reasons.

Finance Minister Jim Flaherty, will announce new rules for credit cards next week that will include regulations for issues that are unfair to consumers. Some of these changes will include a required 21 day grace period for all credit cards, which means that if the payment is sent within the 21 day window there is no interest accumulated. Currently, grace periods vary from one bank to the next. Banks and credit card companies will need to indicate clear interest rate change information – so that they’re unable to simply increase credit limits whenever they want.

“We have to make sure the system operates fairly, and everybody knows the rules,” Jim Flaherty said during an interview with Washington.

The Bank of Canada cut the overnight rate to a record low of .25% earlier this week, but most banks are charging almost 20% interest on unpaid bills which isn’t giving cardholders much needed relief from the interest-rate cuts.

Canadians, just like Americans, are living off credit cards more frequently than ever before. The neighbors to the north are also experiencing record numbers of people losing their jobs, and will be facing huge credit problems if the trends continue. Canadian bank credit card balances have increased from $41 billion from August of 2008 to $49.9 billion currently – which is an increase of almost 40% in a year’s time, according to a report by Deloitte.

According to Moody’s Investors Service, credit card losses rose to 3.1 percent of the average balances in the third quarter, which is the 7th consecutive period of increases. While still training the United States card losses of 6.6% of balances, the number is still too high.

Up to three parliamentary committees in Ottawa may be holding hearings on credit card and bank issues, with the committee reports being watched closely by Flaherty to determine whether additional governmental regulations will be needed.

Date April 24, 2009

Chief Economics Adviser Gets Some Sleep During Meeting With President and Credit Card Executives

In a meeting held in the Roosevelt Room of the White House with President Obama and credit card executives on summersweb1April 23rd, 2009, the chief economics adviser, Lawrence Summers was caught taking a nap at the table. Of course, the photographers had a good time with this, snapping pictures left and right of the man has he nodded off, holding his head on his hand and eventually sliding right off his hand before waking up.

Reporters all over the internet have also had a good time with the story, and comments from readers express outrage that in a time when the economy is doing so poorly and millions of people are wondering how they’ll keep food on the table our chief economics adviser is snoozing on the job. Some have gone as far as saying his ability to nap during the meeting just shows a lack of concern for American citizens – since Mr. Summers needn’t worry about where his next paycheck will come from.

The Caucus reported the story yesterday, with a couple of photographs, including the one seen here. While inappropriate to nap during a meeting, people should cut the man a little slack. The world happens to be in a major economic recession, and you can bet the chief economics adviser has been kept busy working with the President to come up with solutions to the troubled economy. Aides reported that Mr. Summers has hosted a number of midnight telephone calls, in addition to working the normal day hours – it’s human to become tired and need to sleep when the body and mind aren’t given enough time to rest.

Date April 11, 2009

Banks in Better Financial Position Want to Pay Back Government Loans to Avoid Restrictions

obamaOn April 3rd, President Obama came out of a meeting with senior economic advisers and said, “what you’re starting to see is glimmers of hope across the economy.” Banks that are now in a better financial position are looking to pay back the bailout loans they received in order to avoid the restrictions that are attached to that money – increases in executive pay, for one, and hefty premiums banks agreed to pay when they first received the bailout funds.

The Obama administration’s next step for fighting the recession is to complete stress tests of banking institutions – similar to the testing that took place with General Motors before the forced resignation of the chief executive. The balance sheets of the weaker banks will be examined over the next three weeks for “toxic assets”, like mortgages that no one is willing to purchase at this time. Banks are resisting this process because they will have to show big losses when they relieve their financial statements of deteriorating mortgages and mortgage-backed securities. Analysts have estimated that US banks have more than $1 trillion in mortgages on the books – but only a small percentage have been labeled as likely losses. Goldman Sachs economists estimate that banks are valuing their mortgages at an average price of 91 cents on the dollar – but this is much higher than investors would be willing to pay for them at this time.

Despite the resistance, senior officials are pushing forward with the plans as they are expected to prove pivotal for the next phase of the bailout effort. The new $500 bill to $1 trillion plan will make use of public subsidies to encourage private investors to purchase mortgage assets and help provide some economic relief.

The Treasury has plans to subsidize purchase of these “toxic assets” of mortgages and mortgage-backed securities with low-cost loans to buyers to help cover the upfront expense – but there is a large percentage of analysts that warn that most banks will remain reluctant to sell the assets and this becomes one of the Obama administration’s biggest challenges for pushing forward with this bailout plan.