Consumer Alert: Check Your Credit Card Statements This Month
Dale Dixon
Published: Yesterday
As your credit card statement arrives in the mail this month and March, start looking for a few changes. On Feb. 22, new consumer protections kick in, thanks to the Credit Card Accountability Responsibility and Disclosure Act of 2009.
About 75 percent of cardholders admit to not reading the terms and conditions of their credit cards, according to a CreditCards.com survey.
Remember: The large print giveth and the fine print taketh away. Here are a few items you might find interesting:
MORE NOTICE FOR INTEREST RATE CHANGES: Card issuers must give card holders 45 days advance notice in the event of an interest rate change. Additionally, promotional rates must apply for at least six months, and, unless disclosed up front, card holders cannot have their rate increased in the first year.
CARDHOLDER OPT-OUT: If there are significant changes made to the terms of the account, card holders can choose to reject those changes and will have five years to pay off the balance under the original terms.
Older Age Restrictions Added: Card issuers are no longer allowed to issue a credit card to people under 21 unless they can prove they have the means to repay debt or if an adult older than 21 co-signs on the account. Credit card companies also face new restrictions on how they can promote cards to college students.
NEW RULES FOR MONTHLY STATEMENTS: In response to complaints that bill due dates were being moved up – and leading to increased late fees – monthly statements must now be mailed or delivered 21 days before the due dates. Additionally, card issuers no longer can set a payment deadline before 5 p.m. and cannot charge card holders if they pay online, over the phone or by mail – unless the payment is made over the phone either on the due date or the previous day.
OVERPAYMENTS GO TOWARD HIGHEST INTEREST BALANCES: If the card holder has varied interest rates for different services or accounts, any overpayments must be applied to the account that is incurring the highest interest rate.
OVER THE LIMIT OPT-IN: Card holders must opt-in to be able to exceed their credit limit – and subsequently be charged an over-limit fee by the issuer. If card holders choose not to opt-in, then they will not be able to exceed their credit limit and incur any fees.
INCREASED DISCLOSURE ON MINIMUM PAYMENTS: Card issuers must disclose how long it will take card holders to pay off their bill if they only pay the minimum monthly payment as well as how much the card holder would need to pay every month to pay off the balance in 36 months.
SAY GOODBYE TO DOUBLE-BILLING CYCLES: When calculating finance charges, card issuers can no longer employ two-cycle or double billing – a method that causes cardholders to pay interest on previously paid balances.
Dale Dixon is president and CEO of the Better Business Bureau, a not-for-profit organization serving Southwest Idaho and eastern Oregon. Reach him at 342-4649 or ddixon@boise.bbb.org.
Mar 05th
Weekly Economic Insight: 1 March – 5 March 2010
Author: Kenn Lamson
Comments: 0
The week ending 5 March 2010 saw the manufacturing sector post somewhat slower growth than expected but services moving further into expansionary territory. The American consumer may have recently loosened the purse-strings, with both spending and credit rising more than expected.
CONSUMER SPENDING
On balance, consumer spending continued on its gradual uptrend, and for a change was at a faster rate than expected. January’s increase was lead by spending on nondurable goods (boosted by gasoline expenditures), which gained 1.8% month-over-month. Spending on durable goods was up only 0.1% and services up 0.2%. The monthly personal savings rate fell from a revised 4.2% in December to 3.3% in January. We believe it’s exceptionally unlikely that the American consumer will resume spending at pre-recessionary levels anytime soon (perhaps for many years), given the elevated unemployment level and other sources of economic distress; however, stabilization and moderate growth in spending driven by increases in wages and employment while simultaneously reducing outstanding credit and raising the savings rate is our fervent hope.
ISM MANUFACTURING INDEX
While it represents a relatively small percentage of the economy, this report points to a continued expansion of the manufacturing sector. While the survey fell back from January’s surprisingly good reading, the Index level indicates solid growth. Growth appeared in 11 of 16 industries surveyed. Importantly, new orders accelerated for the eighth month and the order backlog grew for the second month. The employment component of the Index rose by nearly three points further into positive territory, suggesting that manufacturers have reached their maximum productive capacity given existing resources and have begun to hire. Inventories remain extremely lean.
CONSTRUCTION SPENDING
A -1.4% month-over-month decline in non-residential spending was the primary driver of the January decline. Residential construction spending rose +1.1% in January while government spending fell -0.7%. Year-over-year, total construction spending declined -9.3%.
Weakness in construction spending is a double-edged sword: Positively, a slower rate of construction makes it easier for the large volume of vacant, foreclosed or otherwise distressed homes and other buildings to be absorbed; negatively, however, continued contraction of this sector of the economy removes a potential driver of employment and incomes. Clearly it’s unlikely that construction will be a broad-based engine of economic growth in the near future.
White = actual; Red = revised
ISM SERVICES INDEX
Beating the consensus of analysts’ expectations, the Index rose further above the 50.0 mark, indicating continued expansion of the critical service sector. Growth was seen in the “information”, “arts, entertainment & recreation” and “transportation” industries. Growth of the new orders component for the sixth consecutive month is also encouraging. However, the Index’s employment component showed a slower rate of contraction but remains at a dismal level. Also concerning is that only 9 of 18 industries expanded, with 8 continuing to contract.
FACTORY ORDERS
Growth in new orders was solid for both nondurable goods and durable ones in January. Orders were strongest in nondefense aircraft & parts and defense communication equipment (last month’s weakest groups). New order growth was weakest in power transmission equipment and photographic equipment. Basically an updated version of last week’s Durable Goods Orders release, the durable goods side of this series tends to be fairly volatile since it includes high value transportation items such as aircraft and ships.
PRODUCTIVITY AND COSTS
Unsurprisingly, since unemployment has risen while manufacturing has apparently begun to rebound, labor productivity – the amount of goods and services produced per worker – rose sharply in the fourth quarter of 2009. As companies sliced payrolls and benefits, Unit Labor Costs – the ratio of hourly compensation to productivity – of course declined.
While this data is by now old news, it reinforces that, since labor-related costs are the vast majority of expenses for most companies, consumer-level inflation is unlikely to become a problem in the near-term.
Quarter-over-Quarter change in Labor Productivity (white) and Unit Labor Costs (red)
EMPLOYMENT SITUATION
The most closely-watched economic release of the week (and the month) was Friday’s Employment Situation. It’s somewhat confusing because it contains data from two surveys, the Household and the Establishment, that are conducted differently and therefore provide different estimates. Also, each Survey shows both Seasonally Adjusted and Not Seasonally Adjusted data, so getting a read on what’s actually happening is challenging. The “headline” numbers are the Unemployment Rate from the Household Survey and the Nonfarm Payrolls figure from the Establishment Survey, both of which are seasonally adjusted. For a broader discussion of the Employment Situation data, see our Economic Insight research entitled “Fun With Numbers” released 5 September 09.
Household Survey
Adjusted for seasonal variations, the Household Survey data showed that the number of unemployed persons rose by +34K during February, interrupting the decline from prior months. Full-time workers have declined by -4.0 million over the past year while part-time workers have increased by about +1 million. About 8.8 million Americans are employed part-time because of slack business conditions or because they could only find part-time work, up from 8.3 million in January. Multiple job-holders remained relatively stable at 5.1% of the total employed. The average duration of unemployment shortened slightly in February to 29.7 weeks from 30.2 weeks – about 7 months – but an alarming 40.9% (6.1 million) of unemployed Americans remaining unemployed 27 weeks or longer. Because of the increase in the number of temporary and part-time workers, the broadest measure of labor underutilization, which also includes “marginally attached” and “discouraged” workers, rose to 16.8% in February from 16.5% in January.
According to the Household Survey the unemployment rate for manufacturing jobs was 12.1%; for construction, 27.1%; agriculture, 18.8%; healthcare and education, 5.6%; and government, 4.0%.
UNEMPLOYMENT RATE
Establishment Survey
The seasonally adjusted Establishment Survey data showed a drop of -60K jobs in goods-producing businesses versus a gain of +42K jobs in service-providing businesses; notably, this report appears at odds with the ISM manufacturing and nonmanufacturing survey data cited above.
While the overall number showed a small (-18K) decline, the Survey showed gains in many major private industry groups. As suggested by the Household Survey, temporary help services once again added a relatively large number of workers (+48K) and healthcare & social assistance companies added +20K. Meanwhile, the construction sector continued to bleed jobs, losing another -64K and transportation & warehousing lost another -12K. Government employment totals fell by -18K, with local government shedding -31K while the Federal government added +16K.
Average hourly earnings were $22.46 in January, up $0.01 from January and $0.41 from a year ago. Month-over-month Increases have been modest but consistent, reinforcing the idea that wage pressures are nonexistent.
The average private work-week shortened by -0.1 hours to 33.8 hours. The longest work-weeks were recorded in Mining & Logging (42.6 hours), Utilities (40.6 hours) and Durable Goods manufacturing (39.8 hours). The shortest hours were, unsurprisingly, in Leisure & Hospitality (25.7 hours), Retail (31.2 hours) and Education & Healthcare (32.6 hours).
MONTH-OVER-MONTH CHANGE IN NONFARM PAYROLLS
Analysis
The Establishment Survey has a “large company” bias; the “birth/death model” is used to estimate the number of jobs created by small companies. Given the importance of small businesses in our economy, we believe (and the historical record would suggest) that these firms are the “canary in the coalmine” of domestic economic activity, since they have less cash on the balance sheet, less access to credit, and less exposure to overseas markets than large companies. Consequently, we prefer to emphasize the Household Survey in our analyses.
According to the BLS the massive snowstorms that hit the US (especially the east coast) probably didn’t skew the February unemployment stats. However, according to the BLS, “In order for severe weather conditions to reduce the estimate for payroll unemployment, employees have to be off work for an entire pay period and not be paid for the time missed. While some persons may have been off payrolls during eh survey reference period, some industries, such as those dealing with cleanup and repair activities, may have added workers.”
We see Friday’s release as offering mixed signals:
A rather sobering realization is the fact that if this recovery were “normal”, the economy should be generating substantially more jobs than were are currently seeing. According to economist and strategist David Rosenberg, 2.5 years after the Fed begins to ease, the economy is usually generating about 150K jobs per month; job gains after a quarter of 5.9% GDP growth (like we saw in 4Q09) are usually about 215K per month. The gulf between “what should be” and “what is” highlights the difficulty the economy’s government handlers will have getting it up off the mat.
CONSUMER CREDIT
Consumer credit outstanding rose in January for the first time in a year. Non-revolving credit, such as auto loans, actually rose 5.0% (a continuation of January’s 3.7% increase). Revolving credit like credit cards fell at a much slower rate, dropping -2.3% on top of last month’s -12.9% plummet. The decline reflects both consumer pay-downs and tightened credit standards.