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Chase Freedom Lifestyle Index Points to Consumer Confidence

Do you remember how you spent the summer? If how Americans spent their money is any indication, families across the nation stuck their collective noses into a lot of books, hit the road and generally tried to improve themselves. That’s according to the recently released third quarter Chase Freedom Lifestyle Index.

Released each quarter, the Chase Freedom Lifestyle Index is one of many tools available to measure consumer attitudes and behaviors. Unlike opinion polls, the Chase Freedom Lifestyle Index tracks actual spending by Chase cardholders and releases the data in its aggregate form. Given that Chase cardholders represent a broad cross section of Americans, the index can provide a window into consumer trends and reflect overall confidence in the economy.

If that’s the case, then this most recent iteration of the index paints a fairly rosy picture of consumer mindsets heading into the already revved up holiday season. For instance, the index found that consumers spent 13 percent more on books than they did during the same period last year and 18 percent more than in 2012. Spending on lessons and classes also saw a significant six percent uptick and outlays for sporting goods also rose by eight percent. Some of the increases in spending were also clearly seasonal. The amount spent on tolls rose by 35 percent compared to 2012 – up 17 percent compared to last year – and purchases of office supplies and consumer electronics were also up briskly, a reflection of preparing for an upcoming school year.

There were some weak areas of spending in the index. Whether it was a lack of good movies or too much good summer weather to blame, movie theater purchases were down by 25 percent. Also down compared to 2013 were toy purchases, which fell by 10 percent. And despite higher prices, grocery spending also was slightly down, dropping by one percent compared to 2013.

The release of the Chase Freedom Lifestyle Index came on the heels of the results of the Conference Board’s Consumer Confidence Index, which were revealed on October 28. Many analysts had expected the index to decline, in keeping with a sluggish September report. But the index rose from 89 in September to 94.5 in October. “A more favorable assessment of the current job market and business conditions contributed to the improvement in consumers’ view of the present situation,” said Lynn Franco, Director of Economic Indicators at the Conference Board. “Looking ahead, consumers have regained confidence in the short-term outlook for the economy and labor market, and are more optimistic about their future earnings potential. With the holiday season around the corner, this boost in confidence should be a welcome sign for retailers.”

November 10, 2014
Will Apple Pay Dominate Mobile Payments? Apple Pay Launch Cheered And Resisted

After launching alongside Apple Inc.’s two new versions of the iPhone in September, the company’s digital wallet, known as Apple Pay, officially launched on October 20. While there was no way for people to line up outside Apple Stores in order to use it, early indications are that there is real demand for Apple Pay, which allows consumers to pay for items with a tap of their phone.

At a Wall Street Journal conference in California on October 28, Apple CEO Tim Cook revealed that over one million credit cards were activated in the Apple Pay service within just 72 hours of its debut. In order for it to work, users of Apple Pay either manually enter their credit card account information into their phones or simply take a photo of the card.

In some ways, the rapid adoption of Apple Pay should come as no surprise. The six largest credit card issuers, which together account for over 80 percent of all credit card transactions in the U.S., were early supporters of Apple Pay. So, too, were the three largest credit card networks, American Express, Visa and MasterCard along with major retailers such as McDonald’s, Walgreens and Whole Foods. Taken together, there were around 220,000 retail outlets ready to accept Apple Pay when it launched.

While Apple Pay was met with enthusiasm by many shoppers, its reception was by no means universally warm. Indeed, as numerous media outlets, including Time and The Christian Science Monitor reported, a number of large stores have taken steps to ensure that their customers can’t use Apple Pay. Drug store chains CVS and RiteAid went so far as to remove the Near Field Communication (NFC) technology that Apple Pay relies on to function from the registers at its stores.

As Time points out, the reason for the rebuke of Apple Pay is pretty simple: RiteAid, CVS, Walmart and other companies are developing their own mobile payment system called CurrentC. The desire by the backers of CurrentC to see it prevail over Apple Pay is also not difficult to grasp. “It’s designed to sidestep the fees that retailers have to pay credit card companies like Visa and MasterCard every time a customer makes a credit card purchase, marking their latest move to duck those charges. Apple Pay, meanwhile, has the support of credit card companies because it keeps those fees intact,” writes Time reporter Alex Fitzpatrick.

If the resistance and competition Apple Pay faces worries Cook, he’s certainly covering it well. In fact, Cook believes that consumers will ultimately determine which payment system prevails. “You are only relevant as a retailer or merchant if your customers love you,” he told conference attendees. “It’s the first and only mobile payment system that’s easy, private and secure.”

October 31, 2014
The Race Is On: Comparing Apple Pay and PayPal

Comparing Apple Pay and PayPal. That is what a lot of consumers interested in ditching the plastic in their wallets will be doing now that PayPal has made it clear that it’s going to make a play for the growing mobile payments market.

For well over a decade now it has been impossible to think of eBay without also thinking of PayPal. True, PayPal has been a subsidiary of eBay since it was acquired in 2002, but the connection in the consumer’s mind was probably more visceral: In order to buy something online at eBay required a PayPal account. On September 30, though, that bond was snapped when eBay announced that it would spin off PayPal, which is set to now become its own publicly traded company in 2015.

Although repeatedly denied by eBay executives over the past year, the move does not come as a major surprise. And the reason it is happening, many speculate, is simple: Mobile payments. Indeed, while PayPal has become the go-to method of online payment, many consumers don’t even consider it when it comes time to make a purchase with a smart phone. Making that transition to become a leader of the quickly evolving mobile payment industry is a huge opportunity. Market research firm eMarketer expects the mobile payments industry in the U.S. to grow to $118 billion by 2018, up from just $3.5 billion this year.

Of course, PayPal is not alone in pursuing this large market. Google Wallet and other mobile payment options like Square have been around for years. Earlier in September, Apple threw its hat into the ring with the unveiling of Apple Pay, the announcement of which included deals with large retailers, such as Whole Foods and McDonalds.

Many observers believe that Apple will provide stiff competition for PayPal. A large measure of its advantage comes from the fact that Apple Pay is incorporated into the iPhone 6 and iPhone 6 Plus, which were purchased by 10 million customers during the first weekend it was available. “Competitors will be forced to counter Apple’s smart phone advantage,” Citicorp analyst Donald Fandetti said in a Bloomberg article. “We see good merchant and consumer adoption over time.”

Still, other observers contend that an independent PayPal will be more able to innovate and come up with mobile payment services and products that will challenge Apple, Google and other competitors. While it’s impossible to predict which individual company will flourish in the mobile payments industry, the sheer level of interest by big brands does indicate that the days of plastic cards are numbered.

October 10, 2014
Consumer Financial Protection Bureau Under Fire For Mismanagement, Discrimination

When it was first established as part of the sweeping Dodd-Frank bill in 2010 the Consumer Financial Protection Bureau (CFPB) was envisioned as something of a white knight – a good guy with some muscle that could help protect American consumers from too powerful Wall Street bankers. But if recent allegations by CFPB employees that have been aired by congressional investigators and in an in-depth story in The Washington Times are true, many of the agency’s own workers need protection themselves.

Among the charges included in The Washington Times story about disgruntled Consumer Financial Protection Bureau workers include those of Ali Naraghi, a bank examiner with the CFPB who claims that he was called a “f’ing foreigner” by superiors when he questioned the methodology used to assess financial institutions. Naraghi, who filed a complaint about his treatment by CFPB supervisors and testified before congress, formerly worked at the Federal Reserve, where he received glowing reviews for his performance. By contrast, Naraghi has received the lowest performance rating possible from his bosses at the CFPB since he joined the agency in 2011, a fact he attributes to his raising concerns about what he considered the lack of objectivity in the CFPB’s methodology.

Other allegations about how the CFPB is run are equally troubling. The Washington Times reports that dozens of agency employees have complained that managers run their departments like “fiefdoms.” “The bureau’s lack of accountability is enabling managers to create their own mini-fiefdoms, stock the ranks of inexperienced and unqualified friends and retaliate against anybody who disagrees with their agenda,” reads the story, written by reporter Kelly Riddell.

Citing internal agency documents, the newspaper also reports that white employees at the CFPB were twice as likely to receive the highest employee rating than black or Hispanic employees. According to Angela Martin, a CFPB enforcement attorney, there is a division of the CFPB referred to as “The Plantation.” “There is an entire section in Consumer Response Intake that is 100 percent African-Americans, even the contractors, and it’s called “The Plantation.” And people tell me it’s very hard to leave The Plantation. You must be extremely savvy, or you must [have] somebody else [help you] to get out,” Martin testified to congress last spring.

For its part, the CFPB says it is working with the union representing its employees to address employee complaints and what are alleged to be systemic problems. At the same time, a CFPB spokesperson told The Washington Times that, on average, a survey of employees shows that the agency’s workers are more satisfied with their managers than federal employees as a whole. According to the survey, nearly 75 percent of employees said they had a high level of respect for the agency’s senior leaders, compared to 54 percent of employees across the entire federal government.

October 5, 2014
Get Financially Fit by Avoiding Rising Overdraft and ATM Fees

Have you ever made a $20 purchase with a debit card and ended up shelling out $50 because you forgot you didn’t have enough money in your account? If you did have to fork over an additional $30 to pay that dreaded overdraft fee, you’re actually a little bit fortunate. That’s because a new study by Bankrate.com pegs the average overdraft fee at $32.74, a new high as well as the 16^th consecutive year the study has found an uptick in the penalty consumers must pay for sending their account into the red. Which all points to the need to avoid overdraft fees in order to remain financially fit.

As part of its 17^th annual Bankrate Checking Survey, the personal finance website surveyed the 10 largest banks and thrifts in 25 of the country’s largest markets. The survey found that overdraft fees also have geographic distinctions. At $34.80, Philadelphia had the highest, while San Francisco had an average fee of $26.74.

Over the summer the Consumer Financial Protection Bureau (CFPB) put overdraft fees in its cross hairs, noting that the median debit card purchase is just $24. When an overdraft fee of $32.74 kicks in – which consumers typically pay within a few days – the CFPB noted that it amounted to a short-term loan with an interest rate of over 17,000 percent.

There are ways to avoid overdraft fees. One is to simply decline overdraft protection, which has the effect of disallowing any purchase you don’t have the funds to cover. Another is to sign-up for email or text alerts that make you aware when your account has dwindling funds. Still another is to use prepaid debit cards, which only allow you to spend the amount of money you’ve pre-loaded into the account. While some prepaid debit cards have overdraft protection, it’s wise to decline it.

The Bankrate survey had more grim news for the users of debit cards. The trend line for ATM fees is similar to that of overdraft charges, with the average cost of using an out-of-network machine reaching a new high of $4.35 per transaction. This charge includes both the fee consumers pay to the owner of the ATM as well as the amount they must pay their own bank for going out of network. As is the case with overdraft fees, location matters. In Phoenix, the average ATM fees were $4.96, while Cincinnati was the lowest at $3.75.

There was some positive news in the study. This year marked the end of a steady decline in the number of free checking accounts available to consumers. In 2009, 76 percent of non-interest checking accounts did not charge a fee, a number that steadily declined to 39 percent by 2013. This year, though, the percentage seemed to stabilize at 38 percent.

October 1, 2014
Helping A Spouse With Ways To Increase Their Credit Score
Anyone who has ever been married knows that a successful union requires plenty of accommodation and teamwork. While that’s an obvious message when it comes to raising children or keeping the house in order, it also extends to maintaining the good credit any couple will need in order to buy a new home or car. This often can mean finding ways to increase a spouse’s credit score. Marital teamwork is especially important if one spouse has a significantly lower credit score than the other. “While married couples don’t inherit each other’s credit score, one partner’s weak rating could sink the family’s financial goals,” writes Farnoosh Torabi in a new article for Money Magazine. Indeed, as the article makes clear, if husband or wife has a FICO score below the mid-700s, chances are the couple will be penalized with higher interest rates should they need to borrow money to purchase a car or a house.

Fortunately, Torabi lays out for couples ways to increase their credit score. They include:
- Paying bills on time: Because your credit score is largely based on whether you pay your credit card and other bills on time, one easy step to take is simply ensuring that happens. Nobody wants to be a nag, so Torabi suggests setting up automatic account alerts to notify your partner when a bill is coming due.
- Don’t be the life preserver: Although it might be tempting to dip into your own savings to erase your spouse’s debt, Torabi notes that doing so might be counterproductive. If your spouse’s debt is the result of poor decisions and reckless spending, giving them a clean slate won’t teach them anything and instead may encourage them to go back to their bad old ways. Instead, she says cutting back household expenses – especially your spouse’s spending – will help pay off the debt and teach valuable lessons.
- Work together: One tool for raising your spouse’s credit score is allowing him or her to become an authorized user on your credit card account. If you together pay your bills on time and in full, both you and your spouse will reap the rewards of a higher credit score.
- Don’t co-sign: While it may be a good idea to add your spouse as an authorized user to your credit card, avoid the temptation of co-signing for his or her new card. Doing that puts you on the hook for whatever debt your spouse incurs, a very bad thing in the event you ever split. Instead, Torabi says to consider encouraging your spouse to get a secured card. Secured cards require an upfront deposit that serves as the account’s credit limit, which means they are easy to obtain. If your spouse can make payments on time and in full he or she will soon see their credit score rise.
September 25, 2014