Posts Tagged 'banks'

NCUA illustrates credit card difference

The National Credit Union Administration’s new site, MyCreditUnion.gov, is a great place to learn more about credit unions – what defines them, how they’re different from other financial institutions (like banks, or savings and loans), how they’re better, etc.

One of the most illustrative points is their section on credit cards. The NCUA shows what a difference a few percentage points on your credit card rate can make on your payments and total payoff amount.

For instance, the time it takes to pay off a credit card with a $5,000 balance at 18% APR is more than 39 years. At 10.9% APR, the time to payoff is only 19 years.

This comes right along with our new credit card comparison booklet, where you’ll notice that a lot of bank and store credit card rates have been hiked to 18% or more. The store cards are especially high – usually in the 20% range.

The NCUA site also mentions credit card pitfalls to avoid, like balance transfer fees (we don’t have those) and annual fees (we don’t have those either).

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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 AFV is trying to do two things at once: dig up the outdated banker argument, and – at the same time – spin it to fit their Interchange views.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.

WSJ: Banks roll out new fees

The Wall Street Journal reports that banks are finding inventive and creative ways to charge their customers more fees:

Credit-card companies already have been racing to slip new fees and practices into customer contracts ahead of the [Credit CARD Act]. Issuers are closing accounts, switching cards with fixed interest rates to variable rates and introducing cards that have an annual fee…The changes come against a backdrop of rising anger at the nation’s banks—having been largely supported by hundreds of billions of public bailout dollars in late 2008 and 2009.

This is mostly a result of the Credit CARD Act, passed and signed earlier this summer, which puts limits on bank credit card policies and puts a $50 billion hole in banks’ revenue.

Banks will attempt to fill that hole by charging new fees, or resurrecting long-neglected fees. So beware.

The wild, wild west of the credit card world

PBS’s Frontline ran a special called “The Card Game” in November on how the credit card industry hurts customers with exhorbitant fees and interest rates.

Watch the second part, especially, to get an idea of what every day consumers face with rising costs.

Good advice: Move Your Money

Laurent Belsie of the Christian Science Monitor has a bit of good advice regarding big banks:

Take your money out. That’s right. Take your checking and savings account out of that big money-center financial institution and move it to a community bank or credit union.

There’s even a movement afoot to help consumers make the switch, called Move Your Money, with a well-timed message and a good video.

Move Your Money is a project from the Huffington Post, Institutional Risk Analysis (IRA), and the Roosevelt Institute, says Salon.com.

Move Your Money’s objective? Simple: move your money out of the big, out-of-town banks and put it into a local financial institution. They’ll even help you find one.

The project has received media attention since its launch, which is timely considering all the bailouts and credit card shenanigans big banks are involved in.

Check out the video, which uses “It’s a Wonderful Life” to make a good point about big, out-of-touch banks and how they can affect everyday Americans.