New Checking Account Overdraft Rules Now in Effect
Your real options are explained here by Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
“Some Americans may be surprised by new changes in their checking accounts.Overdraft protection is no longer available for checking account customers unless they “opted in” for this service. The new Federal Reserve rules started yesterday.
Before these new Federal Reserve rules took effect, most banks automatically added courtesy overdraft protection to checking accounts, providing the detailsand fees in the fine print. Some customers didn’t realize the high price of thefee until they incurred the charge.
An overdraft occurs when one does not have enough money in a checkingaccount to pay for a transaction, but it is paid by the bank anyway.
This service is a loan from the bank and it isn’t free. Banks charge anon-sufficient funds paid item fee (NSF) that is typically $30-$40. A fee is charged for each transaction paid in this manner.
If you did not opt in, your bank’s standard overdraft practices no longer apply to your everyday debit card and ATM transactions. These transactions typically will be declined when you don’t have enough money in your account,but you will not be charged overdraft fees. The new rules don’t lock you to your choice forever; you can still make changes to your account. You can choose to opt in or out of overdraft protection at any time.
The rules are good for consumers, but will reduce revenue for banks.
Some banks will try to persuade customers to choose the “benefits” of overdraft protection since banks are anxious to hold on to as much fee income as they can.
“This is a good time to sign up for free online alerts offered by most issuers. You can get a daily text or email that tells you the balance inyour account. Knowing the amount of money in your checking account can help you avoid the embarrassment of a declined purchase,” says Bill Hardekopf,CEO of LowCards.com and author of The Credit Card Guidebook.
The new rules do not cover checks or automatic bill payments–banks can stillauthorize and pay overdrafts for these transactions at their discretion andcharge a fee. If you do not want your bank’s standard overdraft practices inthese instances, talk to your bank; they may give you the option to cancel. Statistics on how many people have opted for overdraft protection are notyet available.
A July poll conducted on the National Foundation for CreditCounseling website found that that 26% of 2,089 respondents intended toopt in for overdraft protection.If you are interested in the overdraft protection, be sure to carefully readthe fine print to understand its costs and limitations.
The cost of an overdraft may not end with the NSF paid-item fee. If your account remains overdrawn, you might incur additional fees.
Secondly, transactionsare not necessarily processed in the order they occur so banks can chargethe items to your account in any order they choose.
Finally, even if youchoose to opt-in, the payment of an item is discretionary. Banks willchoose which transactions to cover so a consumer can’t always can’tcount on having overdraft protection when you need it.
Your bank may offer less expensive alternatives to overdraft protection. Some banks allow you to create a link to your credit card, savings accountor line of credit that will fund overdrawn transactions. There is a fee foreach transaction, but it is typically $5-$10, much less than the overdraft protection.You must contact your bank to set up this alternative service, since it is not part of the opt in selection.”LowCards.com ( http://www.lowcards.com ) simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categoriessuch as lowest rates, rewards, rebates, balance transfers and lowestintroductory rates. It also gives an unbiased ranking and review fore ach card.
The LowCards.com Complete Credit Card Index( http://www.lowcards.com/CreditCardIndex.aspx ) is the most objective and comprehensive resource on the Internet which allows consumers tocompare rates for over 1000 credit cards offered in this country.Created by Hampton & Associates, the company has been analyzing thecredit card industry and supplying objective websites on variousconsumer expenses for ten years.
For more information, contact Bill Hardekopf at 1-800-388-1910 orbillh@LowCards.com.
The GREEN TRANSITION SCOREBOARD™ from ETHICAL MARKETS, the independent global multi-media company, tracks total private investment in companies growing the green economy since 2007.The mid-2010 update shows a rise to $1,646,719,228,993 from $1.24 trillion at the end of December 2009.The report was released today by founder-CEO HAZEL HENDERSON, D.Sc.Hon, FRSA , futurist and author of Ethical Markets: Growing The Green Economy (Chelsea Green, 2006).Dr. Henderson has advised the U.S. Congress Office of Technology Assessment, the National Science Foundation and the National Academy of Engineering, tracking these technologies since the 1970s.
Dr. Henderson, creator of the GREEN TRANSITION SCOREBOARD™ (GTS), stressed its vision and purpose, “Our mission of fostering ethical markets and growing the green economy worldwide is shared by millions of entrepreneurs, inventors, scientists, engineers, venture capitalists, investors, pension funds, as well as civic groups, academics, students and employees of incumbent industries in the fossilized sectors in many countries.This requires the revolution in corporate and national accounts we have long advocated – now underway by the new International Integrated Reporting Committee (IIRC) steered by 33 organizations, including the Global Reporting Initiative, the UN Principles of Responsible Investing and many other pension funds and accounting bodies worldwide, with the backing of the International and US Accounting Standards Boards.”
As Matthew Kiernan, founder of Innovest and founder-CEO of Inflection Point Capital Management, author of Investing in a Sustainable World, explains, “The GTS makes a uniquely useful contribution to the necessary macro-economic transition in at least two important respects: it adopts a much more comprehensive and therefore effective working definition of a green economy than is usually the case, and it also provides a robust and consistent framework for measuring our progress towards it.“
“The GTS is an important milestone in measuring the increasing economic viability of the CleanTech universe,” says Stuart Valentine, president of Iowa Progressive Asset Management, a leading US investment firm. “Since 1987, we have guided our investors towards companies leading the growing green economy: the Sustainability Sector.”
Henderson adds, “The GREEN TRANSITION SCOREBOARD™ measures concrete progress as we traverse this great global transition from the Industrial Era to the information-rich, cleaner, healthier and greener Solar Age.”Reports confirm this, such as the July 2010 study Solar and Nuclear Costs – the Historic Crossover by economist John O. Blackburn, former Duke University Chancellor, which finds that solar energy is now cheaper than nuclear.
Helen Rake, principal for Collins Capital Management, Inc., in Jacksonville agrees: “The Green Transition Scoreboard™ gives our ESG clients a true barometer of significant change going on in corporations around the globe.”
Ethical Markets, its partners Mercado Etico, the World Business Academy and the thousands of groups linking to Ethical Markets see this Green Transition as inevitable, viable and achievable, by scaling up existing technologies and energy efficiency gains.This website links to many studies, computer models and reports which indicate that investing $1 trillion every year until 2020 can ramp up material and energy efficiencies, reduce costs of wind, solar, geothermal, water, sustainable land-use and forestry, which together with smart infrastructure, transport, building and urban re-design, can accelerate the Green Transition worldwide.
Timothy Nash, M.Sc., Ethical Markets’ Senior Advisor and Director of Sustainability Research, compiles and analyzes the Green Transition Scoreboard™. “The mid-2010 total of over $1.6 trillion puts G-20 countries on track to reach our 2020 target of $10 trillion.This $10 trillion goal is much less than the $23 trillion U.S. taxpayers are liable, including bailouts since 2008 (www.sigtarp.gov) and only represents 10% of global pension and institutional portfolio assets of some $120 trillion,” says Nash. “This figure has outpaced even the most optimistic expectations for investments in the green economy, providing tangible evidence that investors are shifting their assets and that momentum is building for a green economic transition.”
Henderson and Nash share the hope that this data and the shift to “triple bottom line,” ESG accounting standards will encourage pension funds to follow the lead of the Institutional Investors Group on Climate Change (IIGCC) to shift more of their portfolios away from risky investments in the fossilized sectors and commodities speculation to more direct investments in growing the green sectors.
Nash adds, “Our new totals are broken down into five categories: Renewable Energy; Efficiency and Green Construction; Cleantech; Smart Grid; and Corporate R&D. (Click here for report). We welcome all enquiries!”
Ethical Markets Executive Director Rosalinda Sanquiche, M.Sc., says “Individual investors see the green economy growing on Main Street.We welcome non-profit groups to access the full report by installing our GTS icon with a link to www.greentransitionscoreboard.com on their websites, free of charge for the next 30 days.”
·Timothy Jack Nash, Ethical Markets Media Senior Advisor and Director of Sustainability Research; President, Strategic Sustainable Investments, tim.nash@ethicalmarkets.com, 416-821-9179
As Barnes & Noble considers selling itself—and its founder considers forming an investor group to buy it—it, along with e-book rivals Amazon and Apple face an investigation into suspiciously uniform prices for e-books by Connecticut Attorney General Richard Blumenthal. [Press release]
Following the start of the industrial revolution, in 1824 Jean-Baptiste Fourier discovered a global warming “greenhouse” effect and in 1896 Swedish and American scientists independently concluded that CO2 was the likely cause of global warming.
Nearly 90 years later in 1987 the WMO and UNEP established a scientific advisory body called the Intergovernmental Panel on Climate Change (IPCC) which issued its First Assessment Report in 1990, finding that the planet had warmed by 0.5°C in the past century and would rise further by 0.3°C per decade in the 21st century, accompanied by global mean sea level rises of 6 cm per decade.
In 2007 the IPCC released its Fourth Assessment Report, concluding with 90% confidence that human activity is causing climate change and that “Global GHG emissions due to human activities have grown since pre-industrial times with an increase of 70% between 1970 and 2004.”
In 2008 our planet was estimated to contain 385 ppm (parts per million) of CO2 in its atmosphere, the highest concentration of CO2 for more than 630,000 years. This is widely agreed to be due to human industrial advancement, specifically the production and consumption of power from the burning of fossil fuels that are estimated to have caused around 85% of CO2 emissions.
It is known that global temperature increase must be kept within 2°C to prevent an irreversible chain reaction of greenhouse gas release from forests, peat bogs, Siberian permafrost and oceans, which would change the planet’s ecosystems irrevocably. To ensure this temperature rise does not occur concentration of CO2 must not pass 450 ppm, which means reducing CO2 emissions to 60% below 1990 levels before 2030.
The Dodd-Frank bill, like all major pieces of legislation, is tailor made for politicians. The rhetoric rains down like ticker tape, from supporters and detractors alike. Some might call this the “toughest restrictions on the financial industry since the Great Depression,”as the Washington Post did.
Others might lambaste it as a gross regulatory overreach that will kill American jobs and send the banking business overseas.The truth of course is obscured somewhere in the middle. You could take every major plank and argue it to death.
The Volcker Rule sounds good in theory, but even Paul Volcker notes it was significantly watered down.
So all in all, we’d have to sound two cheers for financial reform. Here areseven reasonswhy it can’t be three cheers. The big winners really are the lobbyists. They fought hard for the industry, and won more than a few victories. They will stay employed as they work to influence regulators over the long haul, as the bill leaves much to be decided. Some of the most important protections will not kick in until thecurrent administration is long gone. When the spotlight dims, the lobbyists might really have their way. And we might never hear about it.
Is the big retailer now taking a definitive step in that direction? Last week, it emerged that the company had taken an ownership stake in Green Dot, which manages the retailer’s prepaid debit cards. Green Dot is currently seeking regulatory approval to acquire a small Utah-based bank for $15.7 million, notesFortune.
Wal-Mart has tried and failed on several occasions to garner a banking license, always in the face of noisy opposition from the industry. In 2007, it dropped plans to gain an industrial-bank charter in Utah. Most people assume it is only a matter of time before Wal-Mart takes the plunge, damn the opposition. The marketing advantages would be awesome, and banks are right to fear such a move.
The time would appear to be ripe. Americans are generally dissatisfied when it comes to credit and debit card practices, not to mention mortgage practices. Wal-Mart has the kind of heft that would allow it to make a huge, consumer-friendly splash.
But the industry will not take this sitting down. If you thought local retailers in many areas fought hard, just wait until national banks train their sights on the firm.
Count me among those that believe that the G-20 is one of the better approaches to global governance in a world that desperately needs improved international policy coordination. While the G-20 has not gotten to where it could and should be, its periodic meetings provide us with important insights into global policy issues.
Ed: There follows a dissection of the G20 communiqué and the piece ends with:
I fear that all this may continue to catch off guard at least three dimensions that are still significant in today’s marketplace:
Mindsets that have difficulties recognizing regime shifts, preferring instead the illusionary comfort of the more familiar cyclical frameworks;
Approaches that focus excessively on rates of change and inadequately on levels; and
Investment portfolios that are over-exposed to equity and credit risk, and that maintain insufficiently hard interest rate duration.
In concluding, I would repeat what I said early yesterday morning when asked by a reporter
“What does the US jobs report mean for markets?”
” Investors should keep their seat belts on and tight.”
A poll of 1,000 likely 2010 general election voters was conducted on March 4-8, 2010 by the bipartisan polling team of The Mellman Group and Ayres, McHenry & Associates. The poll has a margin of error of ± 3%. Here are some key results.
THE FINANCIAL CRISIS AFFECTED AN EXCEPTIONAL NUMBER OF AMERICANS
46% have either lost their job, or had a family member or close friend lose a job due to the financial crisis; 53% have lost some, most or all of their savings.
FINANCIAL REFORM IS A HIGH NATIONAL PRIORITY
74% of voters believe that the chances are 50-50 or better that the U.S. will experience another financial crisis in the next three years.
Most Americans believe that reforming the financial sector is a top priority for the nation, even in the face of other pressing issues such as health care, education and immigration reform, and the war in Afghanistan.
59% of voters felt Congress and the administration should support financial reform now, over other priorities.
INACTION WILL HURT INCUMBENTS
50% of voters say they would view their member of Congress more favorably if reform is enacted this year, while only 18% would view them less favorably.
ALL KEY ELEMENTS OF REFORM MATTER
Each of these major elements of reform was supported by over 80% of voters: An early warning system to address signs of trouble in the system; Ending “Too Big to Fail” and bailouts; Increasing market transparency to protect investors and families; Giving consumers better information about business practices.
AFTER HEARING THE ARGUMENTS FOR AND AGAINST THE PROPOSED REFORMS, VOTER SUPPORT FOR LEGISLATION INCREASED
At the start of the survey, 29% opposed reform, and 40% supported it.
After details were explained and arguments for and against reform described, opposition stayed at 29% but support rose to over 60%.
Click on the link below to read the poll findings.
The Senate isn’t quite finished regulating the credit card industry.
Senators have surprised the industry with unexpected, tough amendments
that would limit interchange fees and allow caps on interest rates.
The amendments that pass will be included in the financial reform bill being
debated in Congress. Both would be significant blows to the bottom line
of credit card issuers.
On Monday, Senator Sheldon Whitehouse (D-R.I.) introduced an
amendment that would require credit cards to follow the laws of the state
where a customer resides rather than the laws of the state where the credit
card company builds its headquarters. Many issuers have their headquarters
in South Dakota or Delaware that have fewer consumer protections and
laws that enable issuers to charge higher interest rates.
Banks warn that of the difficulty of complying and the “avalanche of
lawsuits” that will arise with differing state laws. It could also mean that
less credit would be available for banks and small businesses.
Guest article submitted by Bill Hardekopf, CEO of LowCards.com, his contacts can be found at the end of this piece.
Last week, the Senate passed an amendment sponsored by Senator
Dick Durbin (D-Ill.) that could reduce interchange fees that credit card
processors charge to merchants and allow stores to give customers
discounts for paying with cash, check or debit cards.
The Durbin amendment is good news for retailers, but bad news for issuers,
processors such as Visa and MasterCard, and some cardholders.
“The CARD Act reminded us that regulations have consequences. When the
government adds new rules and regulations that cost banks money, banks find
ways to charge the consumer more in other areas to make up the lost
revenue,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit
Card Guidebook. “Banks warned that the CARD Act would bring higher rates and
fees. And they did. Issuers weren’t bluffing then and they aren’t bluffing
now. If this passes, consumers may not be happy with what the regulations
mean for them.”
The interchange fee is a stealth fee that receives little attention from the
average consumer, but it provides important revenue to credit card issuers.
Each time a consumer uses a credit card to make a purchase, the bank and
card processor charge a fee that is approximately 2% of the purchase price.
If a consumer makes a $100 purchase with a credit card, the retailer gets
approximately $98. The remaining $2 is the interchange fee and is divided
three ways: about $1.75 goes to the card issuing bank, $0.18 goes to the
Visa or MasterCard association, and the remaining $0.07 goes to the
retailer’s merchant account provider.
In 2008, banks collected an estimated $50 billion in interchange fees. The
interchange fees provided vital revenue for issuers during a time of high
defaults and losses.
According to The Nilson Report, consumers made 36 billion debit and
prepaid card transactions and 20 billion credit card transactions in 2009.
Last year, the interchange fees averaged 2.23% for American Express, 2.06%
for Visa and MasterCard and 1.88% for Discover.
Retailers have lobbied Congress against the interchange fee for years,
complaining that the fee is too high.
Provisions of the Durbin Amendment The amendment will allow stores to give customers discounts for
paying with cash, check or debit cards. The seller can also decline credit
cards for small dollar purchases (interchange fees exceed profits on some
sales).
The amendment will direct the Federal Reserve to issue rules to ensure
that debit interchange fees are “reasonable and proportional” to processing
costs. It does not give the Fed the power to set interchange fees.
“Keep in mind that ‘reasonable and proportional’ is open-ended. It does not
put a cap on the fee,” says Hardekopf.
Cost of Reform for Cardholders Banks say they charge the interchange fee to cover operating costs to
process credit card transactions, to maintain the processing network, and to
protect against fraud. They warn that if the interchange fees are cut, they
will have to find other ways to recoup these costs. This could force them to
once again squeeze credit and raise the cost of credit cards at a time when
economists and retailers are hoping for looser credit to boost the economic
recovery.
Interchange fees are used to underwrite “free” credit card loans and
credit card rewards. If the funding dries up, so could the benefits for many
cardholders.
“The interchange fee has helped subsidize credit cards for people who pay
their balance in full every month. The interchange fee allows issuers to
make money from every cardholder, even for those who pay off their balance
every month and do not pay an annual fee. If issuers can’t make money on
these accounts, they are likely to add fees to make these accounts
profitable or close the accounts. Issuers aren’t charities that give away
free loans, cash and airline tickets” says Hardekopf. “Consumers that have a
rewards card with no annual fee or debit cards with rewards may be the first
to see the changes.”
Retailers will save money, but will they pass these savings onto consumers?
“It would be surprising if retailers significantly cut prices because of
this. Many retailers and merchants are also struggling and need every dime
they can get.
If consumers currently don’t know they are paying this fee,
there will probably not be a large outcry if the price doesn’t change,”
says Hardekopf. “Consumers may find the biggest savings with
merchants that give discounts for alternative payments.”
Effect on Smaller Banks and Credit Unions The amendment’s debit fee requirement exempts banks and credit unions with
assets under $10 billion (99% of banks and credit unions), allowing them to
collect the higher fee. However, these cards will cost more for merchants
to accept. While merchants have to accept all cards in the Visa and
MasterCard network, they can set a higher minimum payment for a community
bank-issued card, encouraging consumers to use another card or form of
payment. This could hurt the smaller banks and credit unions because the
interchange fees are an important source of revenue for their own credit
cards, which typically charge lower rates and fees than the big banks.
Results of Similar Legislation In 2003, Australia’s central bank required that the interchange fee be cut
in half, to less than 1 cent. According to the New York Times, banks and
credit card companies claim the lower fees have cost them about $1 billion
Australian dollars annually, or $919 million, and there have been several
changes in Australia’s credit card industry. Banks have reduced credit card
reward programs. Banks now require customers to pay their credit card bill
faster. Annual fees have increased for reward programs.
The Senate could vote on the Financial Reform Bill on Wednesday. If
it passes, leaders of the Senate and the House (which has passed its own
bill in December 2009 that does not include these amendments) will meet the
following week to negotiate differences between the two bills. The Senate
and House would each vote one more time on this compromise bill before
President Obama signs it.
LowCards.com (http://www.lowcards.com) simplifies the confusion of
shopping for credit cards. It is a free, independent website that helps
consumers easily compare credit cards in a variety of categories such as
lowest rates, rewards, rebates, balance transfers and lowest introductory
rates. It also gives an unbiased ranking and review for each card.
The LowCards.com Complete Credit Card Index (http://www.lowcards.com/CreditCardIndex.aspx) is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for all 1060 credit cards offered in this country. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for ten years.
For more information, contact Bill Hardekopf at 1-800-388-1910 or billh@LowCards.com
Is Andrew Cuomo (Andrew Cuomo news) bent on further reform of the credit rating process?
The New York Times reports that the New York attorney general has initiated an investigation of eight banks with an eye on determining whether they provided misleading information to rating agencies.
The banks are Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), UBS (NYSE: UBS), Citigroup (NYSE: C), Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch. Cuomo has already taken look at various pieces of the credit ratings conundrum.
These actions led to deals in which the agencies agreed to ask for more information from issuers and changes in fee practices.
Altogether, these piecemeal actions add up to much less than significant reform, in the eyes of the agencies’ many critics. Indeed, recent congressional hearings have uncovered some sad practices that were all too rife. Big banks luring away agency employees, who turn around and interact with their former colleagues, and lots of gaming of the system.
We’ll see if anything really changes. One aspect of this mess is whether the banks provided misleading data to the agencies. That would hardly be surprising. Banks provided loan data, which agencies fed into their models.
One example of gaming: Banks would simply change the names of services to make it seem like the loans came from a diverse set services, when in fact they came from just one. We may see more action against the agencies. The SEC has already sent a wells notice to Moody’s.
