Getting creative with credit card stories

Oct. 1 marks the start of the fourth and final quarter of 2009, when consumer spending takes center stage. And much of that spending traditionally takes place on borrowed money.

That makes this a good time to develop some fresh angles on the credit card scene. Since most households use charge cards and about half carry an unpaid balance at the end of each month, it’s a topic with universal appeal and you can focus on:

Reform. It’s in the news again since the Federal Reserve threw another curve at credit card issuers Tuesday, proposing new consumer protection rules that will be appended to ongoing reform efforts. Effective in February, banks that extend unsecured credit won’t be able to jack up rates as freely as they do now, face curbs in marketing cards to people under age 2, must apply payments to highest-interest balances first and make other consumer-friendly changes.

Here’s Tuesday’s full statement by the Fed. You might get reaction from local card issuer, including credit unions, about how this will affect their lending practices.

Check out this previous Tip Sheet on credit card reform for more links and resources. And here’s a recent AP story on federal scrutiny of overdraft fees; overdraft accounts are generally a prettied-up version of revolving debt.

Dealing with debt. One enterprising consumer’s viral YouTube revolt won a reprieve on her interest rate from Bank of American and thousands of comments from viewers.

Not all debtors are quite so resourceful. As we head into the holiday season, consider a mini money-makeover series in which you enlist local budget counselors (through a credit union, home economics program or National Foundation for Credit Counseling-approved debt reduction program) to help treading-water consumers make some headway on their card balances. It’s a multimedia natural and an ongoing pre-holiday series will really draw the clicks to your Web site.

For more budget experts, contact the American Association of Consumer & Family Sciences and don’t overlook Debtors Anonymous sites. You’ll have to reconcile their no-name policies with your organization’s ethics rules, but they can be a great source of anecdotes and information about local trends in money woes.

Keep a balanced perspective. As one pundit said on CNBC Tuesday, a lot of the reform – and the federal bailout money issuers accepted -- is aimed at compensating for the actions of people who didn’t read their credit card agreements in the first place, or who overextended themselves. The lenders aren’t the only ones at fault as delinquencies rise, and it’s important to include that context.

Unintended consequences. This recent Washington Post piece points out that responsible credit card users are losing perks to offset the revenue banks won’t be reaping from people who overextend themselves and make late payments. This affects small business people who depend on rewards points to pay for plane fares and other big-ticket items; find out how they and other prudent spenders like having their perks yanked right before the high-spending holiday season.


Come back to Your Daily Tipsheet each morning for advice on where to find sources, background and creative ways to make financial news and trends relevant to your audience.

Covering charge card reform

“Veni, vidi, Visa!”

One of the sporadic shopaholics in my family coined that take-off on Julius Caesar’s “I came, I saw, I conquered,” line about 20 years ago, while wielding her plastic with gusto.

The quip was a scream, but for millions of Americans who racked up debt with similar abandon, lenders got the last laugh. Over the past decade or so, all sorts of arcane accounting devices were developed to wring the most revenue out of an open charge card balance, from double-cycle billing to boost finance charge to universal-default rules that hike interest rates if borrowers are spotted make a late payment – to another vendor. Rule changes were sprung on customers via microscopic type on plain little black-and-white folded pamphlets.

Still, we gorged on easy money, and everyone laughed at numerous tales of easy credit being extended to dogs, babies and garden gnomes as banks furiously churned out pre-approved offers for more. Then the economic tides turned, a wallet load of credit cards ceased being a status symbol and consumers were aghast when they took a good hard look at what they’d signed up for.

As of June, we owed about $917 billion on revolving credit accounts, according to the Federal Reserve’s G-19 Consumer Credit report. Congress got in on the act and earlier this year passed the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which President Obama signed into law in May.

Here’s the White House fact sheet on the bill; some of its provisions kick in today. From now on, credit card issuers have to mail bills three weeks before they are due, and they’ll have to give customers 45 days to mull their options – including a new payoff plan - when rate increases loom.

For more on the credit card reform provisions, more of which take effect in February, here’s a Consumer Reports page devoted to the act and related info.

One caveat: Many consumer advocates – and journalists – trumpet the new legislation as a triumph over evil predatory lenders. To be sure, issuers’ ingenuity definitely has been in overdrive when it comes to some of the convoluted fee and billing structures, and there is no question that glitzy marketing materials eclipsed the plain-Jane contracts that bind so many people to debt.

But it’s not a one-sided story, so don’t write it that way. Many prompt payers will see their rates rise, too, as banks compensate for revenue lost elsewhere. Those who use cards for convenience and rewards, without carrying a balance, may see the return of annual fees and the shriveling of points programs. Always look for the contrarian view when reporting on consumer affairs.

Consumer Action, in their just-released annual survey, takes a look at the pros and cons of the bill, as well as other trends in credit card policy.

Come back to Your Daily Tipsheet each morning for advice on where to find sources, background and creative ways to make financial news and trends relevant to your audience.