Archive for the 'bankwatch' Category

Credit unions grow in 2010

Things are looking up for us in the credit union world, according to the Detroit News:

For a second straight year, Michigan credit unions added more than 50,000 members in 2010. That’s nearly three times the 17,000 members added in 2008, then the biggest gain in five years.

Whether it was disgust with high fees, jacked-up interest rates, slashed credit lines or the handing out of billion-dollar bonuses after taking government bailouts, more recession-weary people have decided big banks look too much like Mr. Potter, the greedy banker in Frank Capra’s classic film.

This squares with the reporting from our local MLive.com on businesses turning to credit unions, too.

Not to brag, but we’ve always thought credit unions were a pretty sweet deal.

Kardashian Kard kancelled

kardashian kard

Aw, shucks – the horrifyingly-bad Kardashian pre-paid debit card has been cancelled because of sky-high fees:

Those fees included a $1.50 fee for ATM withdrawals, a dollar fee if the ATM withdrawal or point-of-sale transaction was declined, and a $9.95 fee to replace a lost or stolen card. And canceling the card would have cost you $6.

With the Kardashian Kard, which was actually a very pricey prepaid debit card rather than a credit card, consumers had the choice of either a six-month plan that would have cost $59.95 or a 12-month plan the would have cost $99.95. The cost of each plan included a purchase fee, minimum deposit and monthly fee for the plan period.

A pre-paid debit card comes loaded with funds to spend, and seems like a great idea for travelers or as an alternative to gift cards. But add in all those fees, and they become a budget buster.

This is a good lesson to keep in mind for credit and store charge cards as well. No matter whose name or logo is on the card, watch out for fees and rates. Is it worth your budget to have someone’s name on the card?

Bank of America: No more free checking

BoA fees

Trying to find any source of income they can, Bank of America is waving bye-bye to free checking accounts – and saying hello to charging customers for face-to-face service, says the AP:

Bank of America, which does business with half the households in America, announced a dramatic shift Tuesday in how it does business with customers. One key change: Free checking, a mainstay of American banking in recent years, will be nearly unheard of.

…To make up for lost fees, [Bank of America CEO Brian Moynihan] also started thinking of new products. In August, the bank introduced a new “eBanking” account, where customers were offered a free checking account if they banked online. The catch: If they opt for paper statements, or want access to tellers for basic transactions, they would be charged a monthly fee of $8.95.

Did you catch that? If you want to interact with a real human being, it’s $9 a month. Amazing.

Store credit cards make more, cost more

A news item from the Wall Street Journal confirms what we’ve found – that store cards (like from Target, Kohl’s, or Best Buy) cost more than a plain old credit card:

A chunk of the customer base for these cards is made up of low-income households and less credit-worthy borrowers. As a result, these cards typically carry higher interest rates and lower credit lines than general-purpose cards.

Store label card issuers also make more off these cards.

“Issuers of retail credit cards make $16 to $18 of interest and fee income on every $100 loaned out, before subtracting expenses,” the Journal says. “Earnings on general-purpose cards typically are $14 to $15 per $100 loaned.”

That one or two dollar difference may not seem like a lot, but multiply it by thousand dollar balances and the millions of people who have store cards, and it adds up to a lot of profit for credit card issuers.

Customers think that by signing up for the store card and getting 10% off a purchase (for instance), they’re getting a good deal. Over the long term, however, these store brand cards can cost you more.

Credit One Bank: slimy new annual fee practice

Credit One Bank (not to be confused with Capital One, even though they share a similiar logo) has raised the annual fee to a whole new level of under-handed: they’ll charge it to your account in monthly installments.

That’s what we learned when one member received a Credit One Bank Platinum Visa solicitation – complete with a $7 “premium design” option.

Credit One offers “no enrollment fee” (whatever that means), but they do charge a hefty annual fee: $75 for the first year, and $99 each year after that. For your convenience, they’ll include that in your monthly bill at $8.25 a month. So no matter what, you have something to pay each month.

Isn’t that thoughtful?

But then being thoughtful isn’t part of Credit One’s business plan. There are plenty of complaints about them on the Web. Add this monthly annual fee charge to that list of complaints.

Exposed: Best Buy credit card has no good options

Best Buy, the giant electronics and appliances retailer, offers a MasterCard from “the world’s local bank” HSBC that gives you two options: a higher rate, or an annual fee. Neither option is good for you.

The tricky part is that you don’t learn this until you start to fill out Best Buy’s online application. It’s not until you’re just about ready to say “give me the card” that they let you know the bad news. And here it is:

You get the “choice” between a card with an annual percentage rate of 17.99%, 22.99%, or 21.74% if you opt for an annual fee.

If you opt for the annual fee, how much is it?

So you pick – up to 22.99% a year, one of the highest purchase interest rates we’ve seen, or $59 a year. That’s not much of a choice.

And since Best Buy hides their disclosures behind their online application, we downloaded it for you and we’re making it available. Check it out for yourself.

American Family Voices: wrong on Interchange

American Family Voices doesn't know quack

We got a funny fax the other day from American Family Voices, a lobby group that’s looking to enact Interchange reforms that could hurt our debit card program.

Here’s the fax. Pretty goofy, right? So goofy that it relies on that ol’ banker trick of trying to paint credit unions as do-gooder banks. AFV is trying to do two things at once: dig up the outdated banker argument, and – at the same time – spin it to fit their Interchange views.

It’s a bunch of quack. Here’s the full text of the fax we got:

If it walks like a bank, talks like a bank, and quacks like a bank… it should be TAXED like a bank.

In 1934, Congress gave not-for-profit credit unions tax-exempt status due to their unique role as lenders of last resort for the poor and underserved.

But today, credit unions comprise a $680 billion industry. This is not your grandfather’s credit union.

So why are these not-for-profit credit unions crying wolf about common sense interchange swipe fee reform?

Credit unions are carrying the water for credit card giants VISA and MasterCard— and the big Wall Street banks that helped cause the financial crisis.

It’s about protecting profits.

Interchange fees cost small businesses and consumers $48 billion every year.

If credit unions want to play with the big boys—and share in their profits—then Congress should tax them like banks.

Today, American Family Voices took out an ad in Politico to tell Congress that credit unions should no longer receive special treatment… and to make sure to pass the Durbin Swipe Fee amendment into law.

We’ve already made our position on Interchange clear, and we can argue about the merits of that all day long. But tying us together with the “big Wall Street banks that helped cause the financial crisis”?

I don’t think so.

Credit unions are tax-exempt because we’re member-owned, we have a volunteer board of directors, and we still serve the underserved. We don’t take the money we make and give it to stockholders or investment groups; we give it back to our members.

AFV claims that “credit unions comprise a $680 billion industry. This is not your grandfather’s credit union.” Well of course not – is growth a bad thing? Credit unions have grown partly due to customers’ disgust with big banks, but our industry is still dwarfed by the for-profit banking industry.

There’s nothing “common sense” about the Interchange reform that lobbyists like AFV are calling for. It’s not going to lower costs for consumers, and it may end up costing them more due to changes in debit card policies if this thing goes through.

Running a debit card program costs money, and Interchange helps credit unions like us pay for the system. You don’t get your electricity for free; you have to pay a power company to deliver that electricity to your home because the delivery costs money. Same with card programs. We hire in-house service employees to help you with your American 1 card questions, and we use Interchange to help pay their salary. And provide security. And provide convenience and a no-annual-fee debit card. Debit card programs don’t run themselves.

Groups like AFV, however, say that we make too much off Interchange fees, and that Interchange fees should only pay for the transmission of the account information. But that’s like paying for just the electrons that cross the power lines. What if a power line goes down? What if a transistor explodes? What if your entire town loses power? Who pays for that?

The only water we’re carrying is for our members. Visa and MasterCard can take care of themselves, and certainly Wall Street big banks can flex their own political muscles. We don’t need or want to help them. American 1 looks out for our members’ needs, first and foremost.

No quacking about it.

Be sure to write or call your local Congressional representative (including Senators Carl Levin and Debbie Stabenow in Michigan, plus local U.S. Representatives Mark Schauer, Gary Peters – who serves on the committee involved – and Mike Rogers) and let them know, as a member, you oppose Sen. Richard Durbin’s Interchange Amendment to the Restoring American Financial Stability Act.

AmEx Centurion and BoA Accolades card: exclusive, expensive

American Express’s Centurion card is a coveted item by celebrities and regular Joes and Janes alike. But that exclusive access comes with a pricetag: a $2,500 annual fee.

Now Bank of America is getting in on the act with its Accolades Card. To get one, just have $200,000 at Bank of America.

Easy enough, right?

The key to making money on these cards in the transaction fees, says Forbes.com’s Liz Foyer:

Cards are an obvious way into the market, and though lenders aren’t going to make much in the way of late fees and interest charges (assuming rich people pay their bills on time and in full, which isn’t always the case) they make up for it in the fees they charge to merchants to process transactions. American Express network transactions mean fees of about 4% each purchase, so a $60,000 car charged to a Black Amex could potentially rake in $2,400 in processing revenue.

Unlike the Barclay’s Black Card, these cards really are offered to exclusive individuals – either the super rich or the super well-known.

For every day people like you and me, try a card that’s more down to Earth.

Worst credit card ever: First Premier Bank

In all the Visa card research we’ve done, we finally found a credit card that takes the cake: First Premier Bank‘s credit card.

Why is it the worst? The South Dakota-based bank’s interest rate took our breath away:

First Premier annual fee

And here we thought 29.99% was the most we’d ever seen. Hope you enjoy that $10 purchase, because it could cost you $16 on your next bill.

How about fees? First Premier has them in spades:

First Premier fees

How about $75 in annual fees? Or $36 per year even after you close your account? They won’t even consider your application unless you pay that $45 processing fee.

Here’s our favorite:

First Premier internet fee?

An “internet fee”? To manage your account online, you have to pay $4?

It gets better: First Premier’s online application only asks for $95 to get the whole thing processed. Even if you wanted to apply, good luck visiting their site without getting hit with a swarm of pop-up ads:

First Premier Bank has a record of misleading potential customers and engaging in shady credit card practices. Read the fine print on their credit card statements, and it’s not hard to figure out why.

First Premier claims to “lift others up,” but really – with all those fees – they’re tearing your financial life down.


American 1 Federal Credit Union