Despite expectations of most analysts, JPMorgan Chase recently announced a fourth quarter profit amounting to $3.3 billion. That translates to $0.74 per share. A year earlier, the company posted fourth quarter profits of $702 billion which amounted to $0.06 per share.

The company posted a net income of $11.7 billion for the year 2009 on record revenue amounting to $108.6 billion. The 2009 net income of the company amounts to $2.26 a share.

However, this impressive earning performance of JPMorgan Chase was not enough to impress investors. JPMorgan Chase shares showed a drop during the early trading period. Investors are expressing concern over the mortgage and commercial loan division’s losses that the bank has weathered. They are also worried about this continuing problem of credit card delinquencies which may mean a precarious climate for the bank in 2010, despite JPMorgan Chase being among the better managed bank in the U.S.

Jamie Dimon, CEO of JPMorgan Chase said, “Though these results showed improvement, we acknowledge that they fell short of both an adequate return on capital and the firm’s earnings potential”. He also said that JPMorgan Chase was benefited by its diverse leading franchises. The bank is seeing strong earnings from its Retail Banking, Commercial Banking, Investment Bank and Asset Management franchises.

While earnings from its other divisions were impressive, JPMorgan Chase’s credit card and mortgage business got hit hard, seeing huge losses which were, however offset by the company’s record revenue from investment banking. Credit losses provision for the company was $4.2 billion. This increased from the previous year by $653 million and previous quarter by $241 million. Included in this provision is an additional allowance of $1.5 billion for loan losses. During the previous year, addition for loan losses was $1.9 billion and, for the previous quarter, it was $1.4 billion.

The company blames weak economic conditions and a decline in the price of housing for the higher estimated losses for their home equity and mortgage portfolios.

For its commercial banking unit, the company’s loan losses went up to $494 million from $190 million. Charge offs for prime mortgage went up to $568 million, equivalent to an increase of 3.81%. During the previous year, the company’s prime mortgage net charge off was $195 million, equivalent to 1.2%. Credit card branch sales for JPMorgan Chase also dropped by 31% compared to the previous year and 6% compared to the previous quarter.

Dimon said that, although the company is seeing delinquencies begin to stabilize, costs of consumer credit still remains high. Employment is also weak and home prices continue as they were before. The company therefore remains cautious, he said.

The popularity of credit card companies and banks seem to be at an all time low these days. The latest public image drop they experienced centers around charity donations American citizens are sending to Haiti after a devastating earthquake hit the country.

Many Americans are sending donations to their preferred charities in order to give support to the victims of the earthquake in Haiti. A lot of consumers are sending donations through credit cards and according to a recent report from The Huffington Post, credit card companies were taking profits from every credit card donation that passed their way.

Consumers were understandably upset over this situation. Already, consumers have been criticizing credit card companies and banks for the interest rate hikes and new fees that they have been imposing in past few months, well ahead of the new credit legislation taking effect next month. The knowledge that credit card companies were making profits on donations to Haiti, not to mention other, non-related donations as well, just adds more fuel to the fire.

In response to this public backlash, a lot of credit card companies have backed down and are moving to a more charitable stance concerning donation transactions for Haiti. This move not only dampens the fires of discontent among consumers a bit, but it may also deflect possible backlash that they are going to get when they announce their controversial bonus pools which should be happening anytime soon.

Major credit card companies who have decided to assist in the Haiti relief assistance – which coming from all over the world – include Visa, Discover, MasterCard and Discover. These companies have announced that they would be waiving transaction fees for charitable donation transactions or they would be donating profits that they see from the aforementioned transactions to charity organizations helping in the Haiti crisis such as the American Red Cross.

Most of the relief assistance announcements made by credit card companies came after media outlets started pointing out that credit card companies would be seeing millions in profits from charitable donation credit card transaction fees. Even with transaction fees costing only $0.05 per transaction, considering the number of transactions that credit card companies see, the sum total is quite a considerable amount. An amount that should be put towards helping Haiti earthquake victims instead, Senator Dodd pointed out.

The outgoing Senate Banking Committee chairman recently issued a statement urging the waiving of transaction fees for donations to Haiti. He said that, as Americans send their hard earned money to Haiti, their donations would do much more good if credit card companies were not “skimming off the top” of these donations.

The financial crisis devastated the finances of just about everyone, most especially banks. Ever since this crisis, banks have done their best to make a dent on the large number of credit card debt and mortgages that American consumers are facing. Efforts spanning several months may already be bearing fruit.

A few of the largest banks in the country have recently seen their bad consumer loans begin to level of. No one is willing to come out and say that recovery is on the way, but optimism is beginning to spread in the industry. Executives from major banks such as Wells Fargo and Bank of America are sounding optimistic and saying that the worst of this economic recession may soon be coming to an end.

As Bank of America made its fourth quarter earnings report, Brian T. Moynihan, who serves as the chief executive of the company said, “Credit quality appears to be stabilizing, if not improving.”

All that optimism is unfortunately limited to banks and other financial institutions. American consumers will not be seeing benefits from the industry’s latest developments any time soon. The huge losses on loans have made banks and financial industries very conservative when doling out loans and credit. In fact, credit flow to consumers have been severely stanched by them and consumers are dealing with a dwindling number of approved loans and tighter underwriting standards. This may be one of the reasons why, in the past few months, rate of losses have begun to moderate.

Howard Atkins, chief financial officer of Wells Fargo believes that, as long as this trend holds, the company’s losses in around half of their 13 businesses in consumer lending will already peak. He also said that, “It is possible — emphasis on the word possible — that consumer losses in total may have already peaked.”

Even with these positive developments, loans that are going sour remain to number quite high. Atkins and a few other experts says that if the economy gets any new bad surprises such as unemployment rising further, this trend could stall or worse, reverse. Banking experts believe that, even though consumer loan losses will see a peak in 2010, losses will still remain high – at least until the general economy and the unemployment rate sees stronger improvements.

Raymond James banking analyst, Anthony Polini, believes that as the second half of the year approaches, it will become more and more important that this general economy sees improvements at a faster rate.

For the moment, however, this economy still remains sluggish, further limiting the ability of consumers to pay off debts.

As 2010 begins, data released by major credit card companies in the United States shows that recovery is still a long way away.

The latest credit card loan performance numbers released by major credit card companies Discover Financial Services, Capital One Financial Corp., Bank of America Corp. and J.P. Morgan Chase & Co. showed that these credit card companies are still under stress from high credit card loan losses. This means that the economy is still under heavy stress and economic stability is still a few months ahead as consumers remain financially troubled and pressured by continuing high unemployment rate.

There is an encouraging sign, however. Among the credit card companies and firms in the U.S., delinquency rates have begun to slow down. Delinquency rates are important figures for industry watchers as they gauge probable future losses among credit card companies as well as firms. Generally, a higher delinquency rate predicts an increase in charge offs, loans that credit card companies write off as losses. This is because late credit card payments are an indication of financial instability among credit card holders and if this trend continues, card holders would be unable to recover. These delinquent credit card payments can progress to nonpayment of the credit card debt. If, after a period of time, usually six months, a credit card debt continues to be unpaid, it becomes a charge off for the credit card company.

The slowing down of delinquency rates among credit card companies may be an indication that charge offs may peak by the first half of 2010. According to FBR Capital Markets analyst, Scott Valentin, the industry may be stabilizing which, he says, is a “first step toward improvement.” Valentin says that if early stage delinquencies continue to drop, charge off rates in the industry should see a peak in a short while. Specifically, analysts expect charge off rates to see a peak either by late spring or during early summer.

Although a peak may be a possibility in a few months’ time, December levels are still considerably high which means that the turnaround of the U.S. economy is still not coming for a while. There is also the seasonal factor. Coming out of a holiday season, consumers may have overstepped their budget boundaries and gotten themselves into credit card debt trouble leading to delayed payments. The Credit CARD Act is also going to be activating next month and this new legislation is likely going to take a considerable chunk out of the profits of credit card companies.

Problems for credit card companies are far from over it seems. Capital One, one of the major credit card companies in the United States recently announced an increase in their charge off rates for the month of December.

Based in McLean, Capital One stated a rise in their annual net charge off rates for U.S. credit cards amounting to 10.14% for the month of December during a recent filing at the Securities and Exchange Commission. During the previous month, November, the charge off rate for Capital One was at 9.6%.

Credit card charge off rates are the percentage of credit card loans which credit card companies do not expect to be repaid compared to the total loans that the company has. The credit card industry saw an alarming rise in charge off rates during the first few months when the economic crisis hit. Consumers have seen their personal wealth shrink considerably due to this economic crisis. Coupled with a rise in the unemployment rate and the result has been a continuing inability of many consumers to pay off credit card debts. Although the rise in charge off rates have abated somewhat during the second half of 2009, Capital One’s charge off rate hike for December indicates that recovery is still far off for both consumers and credit card companies.

There is a bit of good news, however. Although charge off rates went up for Capital One last December, the credit card company also saw a flop in delinquent credit card debt payments. For December, Capital One’s rate for loans delinquent for a minimum of 30 days dropped to 5.78%. During November, the company’s delinquency rate was at 5.87%.

Delinquency rates are important for credit card companies as they are indicators for possible future loan losses. A higher delinquency rate means more consumers are late in paying off loans. In turn, this means that an increase in charge off rates may be coming since the more consumers are late for their payments; the more likely it is that they will default in their credit card loans.

For their international credit card operations, Capital One reported a rise to 9.5% in their charge off rates, an increase from the previous month’s rate which was at 9.5%. The credit card company’s international delinquency rate however dropped to 6.55% from the previous month’s 6.6%.

Capital One, however, saw bad news from their auto loan unit for both their charge off ratings and delinquency ratings. The credit card company’s charge off rate went up to 5.68% in December from 3.67% in November. The delinquency rating for their auto loan unit also went up to 10.03% for December from the previous 9.57% of November.

Last year, the Credit CARD Act of 2009 became law. This year, this new credit law gets activated full force, though some minor provisions did get activated late last year. The bulk of this bill is scheduled to go live on February 22 and credit card holders are finally going to see some protection from the more abusive tactics of companies.

One of the changes that credit card holders can expect is a longer notice period for billing and for rate hike notices. For billing, companies have to send the bills 21 days before the overdue date. This will give card holders more time to come up with the money to pay for their monthly bill. For upcoming rate hikes, companies need to issue notices 45 days before new rates go live. Not only that, but they also have to allow card holders to opt out of the rate hike and inform them of this right. However, card holders who do opt out of any rate hikes will usually have their cards canceled, depending on the card issuer.

The ability of companies to raise interest rates arbitrarily is also going to get muzzled. As long as the card holder maintains a good payment history, companies can no longer raise interest rates except in the case when a “teaser” rate has expired or when a credit card has a variable rate interest. This particular regulation has been blunted by the recent move of a majority of credit card companies of switching their fixed rate credit cards to variable rate ones. For the now rare fixed rate credit cards, if companies do raise their rates, the higher interest will only be applicable to new purchases. Older purchases will still be paid according to the previous interest rate.

This new law isn’t all gravy for credit card holders, however. For instance, this new law severely punishes credit card holders who are fond of making late payments. Those who go over 60 days without paying their debts can see their interest rates go up even higher than it did before. One consolation though, if they are able to keep up with their payments six months straight, the credit card company has to reinstate their previous, lower rates.

One of the seemingly small changes that this new law brings, which could make a huge impact on credit card holders, is the increased credit card term transparency that it requires from companies. In particular, the law forcing card companies to inform card holders of how long and how much it will cost them if they keep paying only the minimum payments should make a large impact on the payment behaviors of credit card holders.

Analysts from Fitch Ratings recently announced that defaults in store branded credit card accounts rose to record levels during the previous holiday season’s shopping spree. They also expect this trend to continue into 2010.

Fitch Ratings tracks in an excess of $65 billion in principal receivables for store branded or private label credit cards. These credit cards are also distributed by more than a hundred and sixty five retailers nationwide, including major retailers such as Best Buy, Wal-Mart, Home Depot and Sears.

The report from Fitch shows that for every eight dollars of receivables for store branded credit cards, one dollar is written off as uncollectable for the November collection period taken as an annualized figure. In December, the Retail Credit Card Charge off Index of Fitch Ratings broke a two month trend of decline. It rose by 1.2% compared to the previous month, bringing the charge off index to 12.56%. An all time high for charge off rates was seen in August of 2009, amounting to 12.81%. During the year 2009, charge off rate was averaging at 11.8% which. This is 42% higher than the historical average which is 8.34%.

Managing Director of Fitch Ratings, however, sees some positive signs, stating that, while the charge off index results of 2009 were negative all throughout the year, deterioration has begun to moderate more recently. He says that losses stemming from charge offs may get lower as credit card issuers set up stricter standards for credit card applications and become much more choosy in offering new accounts to consumers.

Still, analysts from Fitch Ratings expect store branded charge off rates to remain at high levels, at least throughout the first half of 2010. This will primarily be fueled by the continuing high unemployment rate the country is experiencing. However, even with the high charge delinquency and charge off measures, Fitch analysts still expect that, throughout the year, retail card ratings will remain stable.

Aside from tightening credit card standards, the actions of consumers and clients may also prove to have a stabilizing effect among credit card delinquency and charge off rates. According to Fitch, usage of revolving credit dropped at an annual rate of 18.5% for the month of November in 2009. This is the largest dollar value drop the credit industry has seen since 1968.

Analysts from Fitch Ratings also foresee that demand for consumer credit, specifically store branded credit, will remain low as long as income growth and employment among consumers or credit card clients continue to remain weak.

In a move to urge Congress to pass legislation that would increase transparency in the fee structure of credit card companies, a petition is now being circulated in the state of Maine to combat what merchants feel is hurting their businesses.

According to John Babb, company president of J&S Oil, his company is required to pay high percentage and fixed fees for every transaction involving the use of credit cards. He continued that because of this set-up, credit card issuers are “actually making more money on a gallon of gas” than the company itself.

Babb is one of the entrepreneurs who are affected by high interest rates that credit card companies charge on sales with the use of plastic. Processing fees are charged to a business enterprise to enable them to accept payment from anywhere at anytime with the use of major credit cards, debit cards, electronic checks and traditional checks. It is also called processing service.

He explained that the scenario they are in is like a “take-it or leave-it” situation wherein they really do not have a choice. In order to serve more customers, they must accept payment in whatever form and what purchasers demand. This petition contains, among others, giving retailers more power to negotiate with credit card companies. It is also a part of a larger movement by a retail industry group.

Babb admits that they have little refuge to refute major credit card companies. However, with the growing habit of customers of not using cash, he believes that it is not only businesses which are being adversely affected, but the consumers as well. Complaints had also been filed by purchasers even before because of high fees charged with the use of credit cards.

However, in a statement released by some credit card companies, they explained that retailers are actually enormously benefiting from the acceptance of electronic payments. They cited guaranteed payment as an example. Since purchases made are backed by the card issuer, defrayment is secured. They also mentioned benefits such as the prospect of increased sales, faster checkout times and security.

They also rebutted this petition by stating that it is a part of a long effort and failed attempts by retailers and trade associations whom they described as wanting “to pad their profits by shifting their normal cost of business onto consumers.” In what retailers see as unfair interest rates, the credit card industry sees it as a fair share of the former.

The signatures gathered in the petition would be submitted to a national trade group who would then forward it to legislators.

Last May of 2009, Congress and President Barack Obama, created the controversial Credit CARD Act. This act is a set of legislations specifically targeted at eliminating unfair and predatory practices among credit card companies. Creators of this act hope that this legislation would protect consumers from getting gouged by credit card companies and prevent a repeat of the credit card crisis which partly contributed to this economic situation.

The activation of the bulk of the Credit CARD Act is fast approaching – it will activate come February, 2010. However, as the act’s activation comes nearer, it becomes more and more apparent that this Credit CARD Act may not be as good at protecting consumers from predatory credit card company practices as its makers intended it to be.

Granted, the Credit CARD Act does bring some much needed changes in credit card industry practices. For one thing, credit card terms will be more transparent, intelligible and clearer with the act in place. With terms out in the open and presented in a much more understandable format, consumers will be well informed of just how costly their credit card usage will be and they will be able to make informed decisions on how to best manage credit card debts.

The act is also going to limit the way credit card companies can hike interest rates. Late fees and charges for overcharging a credit card will also be much more reasonable and will be related to the violation involved.

However, consumers need to be aware that credit card companies have had ample time to adapt business practices to the requirements of the Credit CARD Act. While that may sound like a good thing – credit card companies complying with consumer protection legislations – it is not.

Consumers would do well to keep in mind that credit card companies are in the business to make profits and a new set of credit card legislations is not going to force them to have a change of heart. The bottom line is that credit card companies are still focusing on keeping themselves profitable, not on complying with this new law.

In the past few months, credit card companies have come up with new ways to circumvent the new credit regulations. This includes adding new fees and increasing interest rates before new regulations prevent them from doing so, moving fixed interest rate credit cards to variable rates to circumvent limitations on interest rate adjustments and many other term changes aimed at keeping their business profitable.

Consumers have always had a huge responsibility to keep their finances well managed. This new credit legislation is no replacement for financial common sense and, in fact, presence of this new law may actually require more financial savvy from consumers.

With less than a month to go before the Credit CARD Act of 2009 fully takes effect, noticeable hikes in interest rates are beginning to take place. According to industry insiders, new credit card offers had risen to more than 12% on the average since the start of the New Year.

Professor Morris Davis of the Wisconsin School of Business stated that this is part of a much larger change in strategy currently being applied by credit card companies in order to keep profitability. He stated that since the new law would limit a bank’s ability to adjust credit card terms, lenders look for other ways to generate revenue.

The rise in interest rates is said to be the highest in the last three years. Davis added that since the government is taking away an avenue for rate return, card issuers are likely to search for other means to maximize earnings.

Among the adjustments seen in the industry are hikes in reward cards. Reward cards are incentives or inducements offered to consumers for them to make multiple purchases. For the past six months, said category had increased by more than one percent.

Bank of America increased the annual percentage rate (APR) on its reward cards recently and this move was followed by another credit card giant, Discover. Small alterations on the terms and conditions of cards are also taking place. As of date, a much shorter introductory balance transfer APR periods had also taken effect.

Analysts explained that card holders and consumers are being adversely affected by these adjustments. If a borrower had to pay $5,000 on a credit card at $150 per month, by using today’s average interest rate, he/she would have to cough out $141 more. The credit would now amount to $6,259. Such is not the case half a year earlier. It was also revealed that having a credit card after next month would be harder to maintain. Davis, on the other hand, implied that modifications into how the system works would mean that banks would have to adapt.

As the law provides, some changes seen adverse to banks and issuers after February 22 are the following: Limitations on interest hikes in the first week after a credit card has been issued; and, that no application of rate hikes would be allowed to current card balances retroactively, meaning it would not affect previous debts, except under limited circumstances.

In the end, Davis contends that the burden is usually shifted to the card holders. By making it harder for credit card companies to do business, consumers are the ones who end up with having to pay for higher rates.

In the event of two new laws becoming effective this year, college students and credit card companies in the State of Illinois would both have to confront new regulations and restrictions.

At the local level, the Credit Card Marketing Act of 2009 took effect last January 1. It is a state law which provides, among other things, a stricter regulation when it comes to “credit card marketing activity.”

This means that well-known marketing strategies such as “the act of placing a display or poster together with credit card applications on a campus of higher education” would be highly limited. This limitation would also basically revolve around “gifts and inducements” as defined by said Act.

Colleges and universities are now mandated not to knowingly tolerate activities “that involves the offer of gifts, coupons, or other tangible personal property to students” within their campuses. T-Shirts, gadgets and the like, which card issuers used to offer as free items in exchange for signing-up a credit card application are thus no longer permitted.

Non-disclosure rules have also taken effect. Alumni organizations, universities and other student groups are forbidden to disclose personal information of students who are below 21 years of age. Violators are set to be fined at least $1,000 per incident for any infraction of this provision.

Illinois State Treasurer Alexi Giannoulias said in a press release that many young people do not have the financial know-how to manage money and thus fall victim to marketing tactics and become buried in debt. Earlier last year, Giannoulias was the one who drafted a version of the bill.

The Credit CARD Act of 2009, on the other hand, requires students to first obtain permission from their parents, spouse or legal guardian before they could own a credit card. Set to take full effect next month (February 22), the law basically provides more stringent requirements for consumers below 21 years of age to become a card holder. In order to forgo with the requirement of having said people to co-sign with them in a credit card contract, students must first show proof of income that they would be able to provide sufficient payments.

Both new laws have similarities in a way that both prohibit disclosure of agreements between students and universities as well as divulging personal information of undergraduates. It also makes illegal the act of using campus grounds to market credit cards. The provisions forbidding the use of items to be given away as inducement and as a marketing ploy are also somewhat similar. However, on top of this, though not mandated, universities are now well-advised that they also give financial education for students.

A credit score is basically a mathematical formula based on numerous information found in a credit card report. This is then compared to millions of other people. The result is a fairly accurate prediction of how likely one is going to pay for his/her bills. Although it may sound unimportant, credit scores are being used as a basis for approval of loans, mortgages, insurance and other transactions. The higher the credit score, the more likely that you would get lower interest rates.

With this on hand, Insurance Commissioner Mike Kreidler is pushing for a complete ban on what he calls “the insurance industry’s controversial practice of credit scoring.”

Reacting to a scheduled hearing on House Bill 2513, Kreidler said that for the last several years, thousand of consumers have had complaints received by his office regarding the said scoring. He stated that even if people religiously pay bills on time, or has never filed a claim or has gotten a ticket, premium rates are still going up based on their credit history.

Credit card transactions affect said scoring. The State of Washington’s top insurance regulator stated that those who are likely to have lower credit scores are card holders who have consolidated their credit cards. Those who cancelled the same or have lowered their credit card limits are also being affected. As such, card usage is now an issue in enrolling for insurance and other credit transactions.

Even people who have enrolled in credit cards to get frequent flier miles eight years ago have rated low scores. This is also true to those who do not have enough active credit cards or bank accounts.

Kreidler noted that although there is no connection between how people drive their cars or treat their homes in applying for an insurance coverage, such instances affect the kind of insurance rates they would likely get. He belied threats issued by insurance companies and referred to them as “scare tactics.” True enough, some industry insiders say that banning credit scoring would eventually lead to a significant increase in insurance rates.

Other reasons for interest rates hike include purchasing items at a 10% discount by using store cards and opting to buy a larger ticket item for a year’s deferred interest.

Representative Sharon Nelson, of the 34th District sponsored House Bill 2513. In the Senate, SB 6552 is being sponsored by Senator Jeanne Kohl-Welles.

Kreidler stated that with the practice being blatantly unfair and discriminatory, it was almost 10 years ago that he campaigned for a ban on such practices. While the insurance industry contends that such scoring is a form of reward for being responsible, he contests that even “people making responsible decisions are being harmed by the practice.”

Card companies have always been keen on keeping an eye on the credit worthiness of their customers. Although at times disconcerting, it is no surprise that they sometimes toe the personal areas of their customer’s lives just to assure themselves that their customer is and remains credit worthy.

The latest trend among credit card companies to find out whether a consumer is credit worthy or not has finally gone online; now, credit card companies are checking out a consumer’s online social network to find out if he or she would make a good credit customer. It’s not only card companies that may be doing this. Mortgage issuers, banks and other lenders may be in on it as well.

The idea is that these financial institutions may have found what they believe to be a reliable source of information on how much of a risk a credit or loan applicant is. They believe that, by reviewing the information in an applicant’s social network, including his or her friends, they can accurately predict the credit worthiness of an applicant.

The concept seems highly speculative and it probably is. However, the basic concept seems to be financially sound and is what these financial institutions are subscribing to. The basic concept is that people who are financially solid tend to group together with other people who are similar to them financially. Thus, if an applicant’s circle of friends seems to look good credit-wise, then he or she is going to look good to creditors.

This move by lenders and credit issuers underline the increased need among them to reduce lending risks. Social networks offer social graphs which allow them to see if a person’s social network is populated with responsible borrowers. If they are, creditors believe that there is a higher chance that the person is a responsible borrower as well.

For consumers, what these credit card companies, banks and other lending institutions are doing may seem a bit intrusive. To be fair, credit card companies don’t seem to be checking on the credit ratings of the people connected to an applicant in his or her social networking site. They are only seeing if these people have accounts with their company and checking their borrowing and payment behavior. Any findings that they generate are also not applied to an applicant’s rating. Mainly, these companies are using information they gather from social networks to increase the chances of an application getting approved.

Of course, this thing can also be turned around in favor of consumers. For consumers who plan to apply for a card or a loan soon, it might help to add as many financially responsible friends as they can to their online social networks.

A lot of consumers have been unpleasantly surprised by unknown credit card terms because they missed reading the fine print in their credit card agreements. A new law, the Credit CARD Act of 2009, is going live next month. It will supposedly bring a fairer atmosphere to the credit industry for consumers. Whether that happens or not remains to be seen.

With this new law, card holders can expect some protection against abusive card company practices. Exactly how protected consumers will be is still up for debate, considering the generous length of time the government gave companies to prepare for it. Card companies are nothing if not creative, specifically in protecting profits, not so much in making cards friendlier to consumers.

This new law will make it tougher for credit card companies to hike interest rates. It will also stop some of the better known predatory card practices such as double cycle billing. However, card companies are now way ahead of consumers. They have already raised interest rates to exorbitant heights before this new law hinders them from doing so. Consumers are fuming, but that’s not even half of it.

While this new law provides interest rate hike protection, it seems to have largely stayed away from putting regulations on fees. According to Reasons Financial Advisors financial expert, Mark Gilbert, this new legislation does not specifically address fees and there is basically no prohibition for them. He expects banks to raise fees in “almost every area.”

“Almost every area” covers a lot of ground. A few fairly obvious ones are fees for balance transfers from one card to another, transaction fees for overseas card transactions, late payment fees and annual fees which may be a new one for those who have not seen them before. In the case of annual fees, card companies had actually phased them out in the last few years, but they are now making a comeback.

Consumers who think that they can avoid getting hit by fees by limiting their card usage or avoiding charging on their cards altogether are in for a nasty surprise. “Inactivity fees” are now beginning to circulate among card company rhetoric. Inactivity fees are fees charged to holders who do not use their cards or whose use do not reach a certain limit for a given amount of time.

Good thing that this new law requires credit card companies to warn holders about significant changes in their credit terms. Consumers should therefore make a point of reading any communication from their card company and see to it that they understand the details.

Instead of giving away gift checks, a growing number of retailers shift to using rebate cards instead. This is in response to the heavy volume of consumers who use plastic instead of cash for purchases. However, according to Consumers Union (CU), even with full implementation of the Credit Card Act, customers are unlikely to benefit much from this set-up.

CU explained that even if gift cards resemble rebate cards, this new federal law as well as state laws does not cover the latter. Because of this, there is no regulation as to how short its expiration dates end and there is also no limitations on the fees that might come with it.

Absent the law’s coverage, Michelle Jun, staff attorney with Consumers Union, stated that while retailers are saving money, there are fees that could eat into rebate savings. Aside from this, rebate cards also come with other restrictions which could diminish its value.

Industry analysts estimate that billions of dollars total the amount of funds issued on this kind of cards. One firm, the Mercator Advisory Group, went as far into saying that as much as $9 billion was ladened into such in 2008 alone.

Consumer Union (CU) stressed that there are big differences between a “gift card” and a “rebate card.”

Among the prohibitions included in the Credit CARD Act of 2009 is that a gift card could still be used within five years from its issuance or purchase and that no fees would also be allowed for a period of 12 months.

On the other hand, rebate cards allow consumers to accumulate cash, services or merchandise based upon a card’s usage. Often, they are offered because of loyalty to a company or for a specific purchase. Such provisions, sadly, does not apply to rebate cards.

CU also cited two forms of rebate cards. The “open-loop” from MasterCard, Visa, Discover or American Express is one. As long as the network is accepted, such cards may be used. The “closed-loop,” however, can only be used on the issuer store or retailer.

A gift card has a restricted money equivalent issued by banks or retailers as an alternative to a non-monetary gift. It does not accumulate in value. Retailers and manufacturers used to issue it in the form of gift checks. Its advantage lies on the fact that it provides options for customers to either spend it or deposit the money in the bank. With rebate cards, this cannot be done.

Pamela Banks, policy counsel for CU, proposed that the time has come for the law to catch-up on rebate cards or plastic payments to protect consumers from expiration dates and hidden fees.

Days after a devastating earthquake hit the Caribbean nation of Haiti, calls for relief and aid continue as the impact of the disaster left most people homeless and without food. Because of this, four major credit card companies announced that it would continue to waive or rebate processing fees on donations.

However, potential donors must first look if the selected charity organization is in the company’s list of accredited U.S. charities that are supporting relief efforts in Haiti.

According to American Express, it would continue to waive and rebate processing fees up to the last day of February. It has selected at least 65 charities approved by the USAID.

Corporate spokesperson, Christine Elliot, stated that the list designated by USAID had been chosen by their company. They believe that the federal government’s arm for administering civilian foreign aid had been diligent in identifying reputable charity organizations. Doctors Without Borders, though not part of the list of USAID, had also been included by American Express.

Visa Inc., on the other hand, would also waive fees until the end of February. It released a list of 11 major charity organizations in the US which provides relief efforts. Among these are the American Red Cross, Save the Children, Direct Relief International, Habitat for Humanity, AmeriCares, Oxfam America, CARE USA, Mercy Corps, World Vision, and US Fund for UNICEF.

Discover, which is estimated to have more than 50 million card members, would continue to forgo its fees also until the end of next month. They have only selected the American Red Cross as its charity organization. It must be noted that this is the first time that this credit card company would waive its fees on such relief efforts. In the wake of Hurricane Katrina, a matching program through its card holders raised millions of dollars for donations.

MasterCard Worldwide, as with the rest, would be waiving transactions fees on donations given through five charities up until next month.

It is reported that if credit card companies would not waive transactions costs, at least 3% of donations would go into their pockets. Only 97% of the total amount donated would actually be received by the chosen relief organization.

As of date, more than 9,000 bodies had been collected from the ruins of the earthquake and it is still expected to rise as more victims are still being uncovered. It is also estimated that at least 3 million Haitians are in need of food, water and shelter. Most have been camping on the streets for fear of aftershocks.

In what seems to be a reaction following reported hikes on credit card interest rates, the Secretary of the Commonwealth of Massachusetts is asking at least seven of the country’s largest card issuers to furnish information to find out if this is true.

Among those who received this letter of request are Bank of America (BAC.N), Morgan Stanley (MS.N), Fidelity Investments, Citizens Bank, American Express (AXP.N), Citigroup (C.N) and Charles Schwab (SCHW.O).

According to a statement released by Secretary William Galvin, this increase in fees and rate hikes of credit cards a month before full implementation of the Credit CARD Act is not in consonance with the legislative intent of Congress.

He further stated that given some abusive practices tied to securities broker-dealers, it could be questioned whether credit card companies and providers are “acting under the high standards of commercial honor and the just and equitable principles of trade.”

In a study made by The Pew Charitable Trusts, it was revealed that commercial advertisements of most credit card companies showed that as compared to July 2009, the median interest rate was lower in December 2008. They noted a 13% to 23% hike in interest rates.

The Pew is an independent non-profit and non-governmental organization whose mission is to serve public interest through information dissemination and upgrading public policy.

Galvin had given said companies until January 26 to reply. The three-page letters were sent to broker dealers last January 14. It contained, among others, instructions to point-out changes that have been implemented since May 2009 with regards to their rates. It is also asking if variable interest rate cards had replaced fixed card rates and if there were hikes that may have been imposed on consumers these past few months.

As of writing, no statement had been released by some of the companies who received such letter. Only Fidelity Investments, thru its spokesman, had stated that they would comply with the request for data.

Galvin is reputed to be a tough regulator. He spearheaded several investigations into market timing and auction rate securities including the compelling of Robert Jaffe to testify about his role in the Bernard Mardoff investment scandal.

The Credit Card Accountability and Disclosure Act of 2009 (Credit CARD Act), on the other hand, is a federal law signed in May 22, 2009. Its aim is “to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan.” It is set to take full effect this coming February 22, 2010.

Lawmakers are set to meet on January 27 to discuss and vote upon another legislation that is seeking to further regulate the credit card industry.

Sponsored by Congressman Louise Slaughter (D-New York) and Congressman John Tierney (D-Massachusetts), this bill entitled Renewing America’s Commitment to Consumers Act contains, among others, provisions that would limit credit card penalty fees to $15 and put interest rate caps at 16%. However, some industry insiders expressed that this bill is likely not to pass.

At the Senate, Sen. Bernard Sanders also introduced a similar bill that would limit interest rates. It was rejected garnering only 33 votes; 27 votes short of the 60 needed.

In a press release last November, Slaughter said that credit card companies had exploited people by increasing rates up to 30%. She also stated that this bill would “provide flexibility for market and lending conditions by allowing for temporary increase in the rate cap, only in extraordinary circumstances and upon regulatory findings” aimed at protecting consumers.

Those who oppose this proposed law, in all likelihood, would cite a record plunge of $17.5 billion that consumer credit took as contained in a Federal Reserve’s report. Some lawmakers also see the latest effort as disadvantageous for small businesses and the economy.

Another factor that would not go untouched is the economic condition which is being blamed much for this credit crunch. Since the recession begun, banks were stricter in their lending standards and card holders were charging less on their cards.

Aware that some of the provisions of the Credit CARD Act of 2009 include prohibitions to raise interest rates if a card holder pays on time, some issuers have started raising fixed rates. The new federal law, which was signed on May 22, 2009 will be fully implemented on February 22.

In the wake of said law’s implementation, some banks and credit card companies have started to shift a large portion of their customers to variable rates. This is because reforms would not be able to touch cards which are based on variable indexed rates. Citigroup, one of the nation’s largest credit card issuer, had written policy notices to its customers that different variable annual percentage rate (APR) for purchases are being hiked to the country’s prime rate plus 12.99%. It also sets-out a minimum of 18.99 annual percentage rates.

According to banks, however, further regulation would hinder credit access for most consumers. A spokesman from the American Bankers Association (ABA) stated that over-regulation would upset the balance between creditors and card holders as such a move would limit access credit.

Credit card companies have been changing their credit card terms a lot in the past few months. A lot of these credit term changes were made in preparation for the upcoming Credit CARD Act, a new legislation signed on May of 2009 aimed at protecting consumers from abusive credit card company and bank practices. Curiously, few of the credit terms card companies have been making which were triggered by this new legislation have been very friendly to consumers.

In the past few months, card holders have seen their interest rates hiked to as high as 33% and even higher. Credit limits have also been cut down severely, even for those with good standing. Rewards have also been cut in half. Followers of frequent flyer mile programs have also had fees added on for their participation in the program. Card companies have even cut a few card holders’ credit lines without warning, only offering explanations after the fact.

For consumers who have been on the receiving end of these recent practices of card companies, it can be quite tempting to just cancel their credit cards altogether, at least the offending ones. A lot of consumers have apparently made the jump to do so, considering the decrease in card usage and the uptick in cash and debit card payments during the last holiday season. Still, for consumers who want to get rid of their cards, there are some painful consequences that they ought to consider first.

A lot of the pain that comes from canceling a credit card has to do with the resulting effect it will have on a card holder’s credit score. Most American consumers know the importance of their credit score. A consumer’s score is a measure of how good of a borrower he or she is. A low score means a tougher time for them to secure loans, and even if they do get a loan, they will usually get a not so advantageous set of terms.

When a consumer cancels a credit card one of the worst things that will happen is that their available credit is reduced. The ratio between a consumer’s debt and his or her available credit is one of the major numbers that credit scoring agencies look at. A drop in available credit definitely puts a negative mark on a consumer’s credit score as it raises their debt to credit ratio.

Another problem is if a consumer cancels an old card line. Credit history makes up for a large part of a consumer’s credit score. If a consumer cancels an old credit card line, then he or she gets hit by another deduction in his or her score.

After credit card companies and firms got some major criticisms for charging their well known hidden fees or the interchange fees on donations to the Haiti tragedy, major credit card companies in the country like Visa, American Express, MasterCard and Discover have decided to finally waive contribution fees to Haiti.

Recently, a Huffington Post report placed some criticism on credit card companies and banks for making money off of charitable contributions made through credit cards. The recent tragedy at Haiti highlighted this fact while also focusing on how this increases the profits that banks and credit card companies make from charitable contributions.

Banks and Credit card companies regularly charge interchange fees whenever a consumer uses his or her credit cards. Even if these credit card transactions turn out to be charitable donations, banks and credit card companies still skim off 3% from a transaction. Thus, whenever a donation is made through a credit card transaction, only 97% of this amount will actually make it to the intended charitable organization. Credit card companies and banks see an income of around $250 million every year just from transaction fees taken from transactions for charitable contributions.

Reacting to recent criticisms, the four major credit card companies have announced that they would stop applying interchange fees to a select number of donations. Visa announced that they would stop charging interchange fees up to February for donations made to a select few major charities that are providing relief efforts and donations to the tragedy that struck Haiti. The final list of the included charities is still being compiled. It also announced that the revenue it generates from charitable donations to Haiti through the next month will be donated by the company.

MasterCard has also agreed to waive interchange fees for relief donations. However, they would only waive fees if the donation is made with a MasterCard credit card issued from the United States and if the donation is sent to AmeriCares, Unicef, American Red Cross, Care USA and Save the Children.

American Express, on the other hand, has stated that it would be rebating transaction fees for charitable contributions up until the end of February. The contributions have to be made directly to nonprofit organizations which are on the Agency for International Development’s website supporting Haiti relief efforts in order to qualify for rebates.

Discover has also announced that it would also be waiving some credit card fees that they implement. However, the company did not produce any details on how it would do so.

Last Tuesday, the Federal Reserve released a 1,555 page set of rules which tells banks how they can comply with the new regulations of the Credit CARD Act. The new rules will become effective on February 22. In cases where laws of the Credit CARD Act were not very clear, regulators from the Fed used their own discretion to extend more protection to consumers or credit card users.

Consumer advocates were quite impressed with a few of the rules that the Federal Government issued. For instance, the Fed took some steps to handle a well known loop hole banks were using which allowed them to rate hikes much more freely even with the new law in place; as long as they used variable interest rates with their credit cards. Variable rate credit cards have their interest rates tied to a particular financial indicator which is usually the prime rate which goes up and down depending on how the United States economy is doing.

What the Fed did was to take away the “floors” that many banks were imposing. “Floors” are minimum interest rates banks place on their variable rate interest rates or charges. Banks insist that “floors” are necessary because they can be used to account for the risks in credit card lending. Consumer groups argue that imposing a minimum interest rate would defeat the purpose of this law which is to allow interest rates to go up or down depending on prime rate fluctuations. The Fed decided to go with what consumers advocated, thus, “floors” will no longer be implemented come February 22.

Another major win for consumers is the new opt in ruling for credit card programs that allow consumers to go over their credit limits for a fee. When enrolled in such a program, consumers may get regularly charged every month for overcharge fees that they may not notice immediately. Once February 22 rolls in, banks will no longer be enrolling consumers or card holders to such programs automatically. Consumers will have to specifically opt in to this program.

Consumer groups are considering the new Fed rulings to be a major, unexpected win for them. For banks, this new ruling represents a major revenue loss as overcharge fees are one of the big revenue makers for them. With the new rules, banks will no longer be able to charge consumers or credit card holders overcharge fees even in cases where they make an error and allow a card holder to go over his or her credit limits accidentally.

Considering the average credit card debt that American households carry – $10,000  – it is encouraging to see that a New Year online poll by the National Foundation for Credit Counseling (NFCC) held in 2009 showed that 76% of its respondents have made paying down their debts the number one resolution to make in 2010. With the way the economy is going, getting away from credit card debt is certainly a worthwhile goal to make for the New Year.

However, resolving to get rid of credit card debt and actually doing it are two very different things. As what most people know, keeping a New Year’s resolution is not very easy to do. For consumers who want to stay away from financial problems this year, keeping this particular New Year’s resolution is a must, however.

To get rid of credit card debt, the first thing that consumers must do is to make sure that they do not add to their already existing credit card debts. Thus, they have to stop using their credit cards and to focus more on using cash for their day to day expenses. If it’s just not possible, then they must at least have a concrete plan which will help them pay off any balances in full every month.

Assessing their debts is also another important step to credit card debt freedom that consumers must make. To do this, they need to gather all their credit card debt statements and figure out not only how much they owe, but also to whom and what interest rates they are paying to each of their creditors.

Once the detail of the debt has been figured out, consumers can then formulate a payment plan for it. They can either choose to target paying off the debt with the smallest balance first or to pay off the highest interest rate debt first. Either way, they have to be patient and persistent with their efforts so that they may finally be debt free one day. Also, while focusing on paying off one particular debt, consumers must not neglect to make the required minimum monthly payments for their other debts so that they at least minimize the impact of interest fees.

Since making consistent credit card debt payments will cost money, it is also a good idea for consumers to readjust their spending habits. The most important step is to define which expenses are needs and which are wants. Wants are non-essential expenses and should therefore be minimized. By freeing up some cash, consumers can pay off more of their debts every month.

Credit card institutions, banks and lending companies are anticipating to lose an estimated $50 billion this year as soon as new rules on credit card policies will be set in place.

Credit companies and banks are racing to find ways and means for the anticipated loses as, in many cases, consumers’ credit cards have been targeted to compensate for losses and to raise revenues quickly.

The effect of the February implementation of the Credit Card Act of 2009 has caused companies to resort to dire measures. Some measures include switching fixed interest rate cards to variable rates to escape the scope of the new rules, launching cards with annual fees and the closing of accounts.

Case in point, credit institutions have still managed to collect as much as $22.9 billion in penalty fees last year in comparison to $19 billion in 2008.

Adam Levin, a credit card advocate and educator, said that he has observed interest rates go up by as much as 12 to 15% as several companies scramble by means of “front-running the laws.”

Consumers have already felt the sharp end of the stick as they fall prey to new fees, higher interest rates and several new charges which may include charges for monthly financial statements.

A Citigroup spokesperson commented, “We understand that customers don’t like price increases, especially in difficult economic times. However, these actions are necessary given customers not paying back their loans and regulatory changes.”

A Bank of America release explained that unless a particular account is late on two payments within a span of 12 months, it was not raising its rates.

Credit clients, according to a statement from American Bankers Association Vice-President Nessa Feddis, are granted ample amount of time to be fairly warned before current credit cards are charged with any increases on interest rate hikes.

Feddis further assured that a 45-day notice is given to customers so that they are given the option to opt out of the increase as well as providing lee-way to look for other card providers. However, credit clients can be dropped by the lending institution, as in several cases, as a result of opting out.

The credit card act of 2009 intends to offer customer protection against unfair or deceptive practices which was designed to expand client safety nets, promote fewer fees and more clarity in transparency when it came to credit policies.

In February this year, several new regulations will be set in full force including a provision that limits rate hikes as well as the credit amounts that student card holders can avail of.

It is no secret that consumers are having a hard time with their finances nowadays. A slow economy and a high unemployment rate are major contributing factors. However, for many consumers, it is the inability to manage their finances, especially in terms of credit card usage, which has led them to financial instability.

According to a report from Congress, American consumers are paying almost $15 billion in terms of credit card fees every year. With the current state of the economy and the job loss many consumers are experiencing, that number is also continuing to rise. This is a grave matter not only for consumers but also for lawmakers as well, one which most hope the new Credit CARD Act will address.

One of the riskiest and also most profitable consumer segments that credit card companies target are those under 21 – usually composed of students still studying in college. A lot of the credit card companies in the U.S. target college students specifically for their credit card marketing campaigns.

Marketing credit cards on campus are already almost a tradition in college campuses during the opening of classes. Credit card companies usually offer incentives such as free food, clothing, accessories and even electronic devices to encourage students to apply for credit cards. Despite the apparent inability of most college students to pay off their credit card debt, credit card companies still want to sign them up. By their reasoning, should college students have trouble paying off their credit card debts, their parents will inevitably step in to help them out. Credit card companies also earn more when card holders are delinquent in their payments due to the fees and interests that they collect.

But, with the new credit card law in place, credit card companies will no longer be able to market as brazenly as they used to to consumers below 21 years of age. The tighter regulations that the new credit card law brings means that credit card companies are prohibited from marketing their credit cards in dormitories, college campuses and even in athletic events to consumers who are under 21 years old. Consumer Law Center attorney, Gary Hinck says that the 21 age limit may make a bit of difference, adding that he cannot imagine a parent co-signing for his or her under-21 child to get a credit card.

The new law will be going live this February. The bulk of the consumer protection that the law provides will be enforced then. However, given the large amount of time that credit card companies have had to adapt to it – mostly in a not so consumer friendly way, whether the law will actually provide the protection it promises remains to be seen.

A setback that has hit the United States commercial paper market rebound as businesses remain wary of the pace of recovery of the economy. Even with a growing appetite for credit fueled by a return of some economic growth, there is still a lot of hesitation among businesses to expand their operations.

According to a data recently released by the Federal Reserve, the commercial paper market in the United States has shrunk by $94.2 billion, dropping the market to $1.076 trillion during the past week. Figures suggest that company or corporate borrowing – commonly used by businesses for day-to-day operations funding – is currently experiencing a severe drop.

Companies are instead raising short term funds for financing their operational expenses such as payrolls and inventories by selling commercial paper. This has contributed to a shrinkage in the commercial paper market. A contraction in the current market suggests that quite a few companies and businesses continue to still have doubts over the pace of this economic recovery. This present commercial paper market shrinkage is incidentally the largest weekly percentage shrinkage seen in the market in more than a decade.

Miller Tabank & Co of New York chief economic strategist, Dan Greenhaus, said that in the next one or two quarters, businesses remain uncertain and unsure over the economic expansion pace. This continuing anxiety of businesses is also fueling a demand for cash and for ultra-short-dated Treasury securities. This demand along with a promise made by the Fed to continue sticking for a prolonged period to their near-zero rate target has placed a lid over Treasury bill rates.

The minutes of the December policy meeting of the Fed indicates that the United States Central Bank may be tightening its monetary policy for this foreseeable future. Jefferies & Co. of New York money market economist Thomas Simons says, “It definitely offers support for the front end.”

The United States government is also going to be winding down its emergency support of the financial system and economy in the coming months. This action by the government should lead to fewer T-bills circulating in the market during these months. The U.S. Treasury is also selling three-month bills which amount to $24 billion and six-month bills which amounts to $25 billion on Monday. The amount for each maturity is notable $1 billion less than what the Treasury is offering this week.

The Treasury also announced that it will be auctioning one-year bills amounting to $26 billion on Tuesday which is $1 billion less than what it offered last December.

One of the biggest concerns for consumers and clients who use banks should be whether their banks are insured by the FDIC or the Federal Deposit Insurance Corp. This is especially true nowadays when the financial landscape is much more risky than usual owing to the effects of this economic crisis pervading in the country.

The Federal Deposit Insurance Corp. is actually an independent agency of the United States government. Their purpose is to protect consumers from losing money stored in their checking account, savings account and other qualified deposits should their banks ever fail. However, in order for consumers to be able to collect insured deposits in the case of a bank failure, a bank must be insured by the FDIC at the time of its failure. It is thus, very important for consumers to ensure that a bank that they are using is actually FDIC insured.

One of the important things that consumers also need to know when looking for FDIC insurance is what type of accounts FDIC insurance is applicable to. Basically, FDIC insurance covers several types of deposits at insured banks. This includes savings accounts, checking accounts, certificate deposits and money market accounts. Accounts that FDIC insurance do not cover are annuities, life insurance policies, stocks, bonds, mutual funds and deposits in safe deposit boxes or the contents therein.

As long as a consumer uses an account that is insured by the FDIC and the bank that he or she is using is actually FDIC insured, then a consumer can rest easy in the fact that his or her deposits are safe even if the bank should fail. As FDIC puts it, no depositor insured by the FDIC has ever lost their money since the FDIC was first created in the year 1934.

FDIC insured accounts have a limit of coverage, however. Up to December 31, 2013, the highest covered depositor amount is $250,000 for every depositor. After December 31, the standard insurance amount will once again amount to $100,000 per depositor. This includes all types of accounts except for a number of retirement accounts and IRA’s.

Finding out whether their banks and their accounts are covered by the FDIC should be a priority for consumers with bank deposits. The shaky state of this economy makes this even more important now. The FDIC offers tools for consumers to find out if their banks are insured. They also have their EDIE estimator which consumers can use to see if their accounts are within coverage limits set by the FDIC.