credit cards

2006 credit card trends aid consumers



Several interesting trends in the world of credit cards showed up during 2006 and most of them seem to be good for the consumer -- for a change.

Debit card growth
In 2006, debit card usage outpaced credit card usage for the first time. According to the 2007 edition of the ATM&Debit News EFT Data Book, debit purchases will total 26.6 billion transactions at the point of sale this year while credit card transactions -- through American Express, Discover, MasterCard and Visa -- were projected to be 24.4 billion. This means more people are paying as they go now instead of buying now, paying later.

Paying down balances
The high point for home equity loans came in 2005, but they continued to be initiated this year. Paying off high-interest-rate credit cards was the most often cited use of home equity. In an unscientific survey begun on Bankrate.com June 15, 2006, 42 percent of respondents who had taken out home-equity loans said they used them to pay off bills.

Another development was the implementation of the 2005 bankruptcy reforms that required card issuers to raise minimum payments. While consumers howled at the abrupt increase in minimums, the point was to get Americans to pay down their credit card debt faster.

Prepaid cards
Prepaid or stored-value cards are taking on new roles, beyond the ever-popular gift card. Among the many new uses for prepaid cards are for travel, payroll, social service benefits, insurance payments, health benefits and "allowances" for teenagers. In a July 2006 study Mercator Advisory Group projected payroll cards alone will grow from 812,500 in 2004 to 14.2 million cards by 2008. Visa USA predicts the market for prepaid cards will reach the trillion-dollar mark, including travel cards, gift cards, cards for teens, and rebate and incentive cards.

Obviously, there's a profit in prepaid cards for someone, otherwise they wouldn't be promoted so heavily. The profit is in fees, and there are fees galore: for setup, transactions, inactivity, even reloading cards with more money. When you purchase a prepaid card, be sure to look at the fees associated with using prepaid cards.

In August the Office of the Comptroller of the Currency issued guidelines for disclosure of fees and expiration dates for gift cards issued by national banks. The gift cards themselves must carry the expiration date on the front of the card; fees for monthly maintenance, dormancy or usage; and a toll-free number or a Web site where consumers can get other information about their cards. The OCC also recommended a brochure or some written disclosure be included with the card that would include the name of the issuing bank, all fees associated with the card and how consumers can make complaints about the card, among other information.

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No-fee credit cards
Credit card issuers introduced a number of new types of cards this year, but one of the most significant was the American Express Clear Card, says Linda Sherry, director of national priorities for Consumer Action in Washington, DC. The Clear Card has no fees of any kind -- no annual fee, no late fee, not over-limit fee, no balance-transfer fee, no cash-advance fee. If other companies see AmEx having success with this type of card, look for them to roll out their own for certain customers.

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