If you’re one of those highly empathetic people who tend to cry at sad movies (and, if you are, you really need to stock up on handkerchiefs before you see War Horse) then you may have been shedding tears for some of your favorite credit card companies. If so, you can dry your eyes. The parent companies of Chase and Citi may have published less than impressive fourth-quarter results recently, but it’s not their card divisions that are causing the problems. They’re doing just fine.

Credit card companies flourishing

Take the Chase card division as an example. According to a Jan. 13 press release from JP Morgan Chase, it issued new credit cards to 8.5 million people in 2011. Meanwhile, its charge-offs (when uncollectible debt is written off the books, and passed on to collection agencies and the like) were just 3.27 percent in the fourth quarter of last year, down from 5.73 percent in 2010, and its delinquency rate (when customers are 30 days or more behind with payments) was 2.32 percent compared with 3.23 percent the previous year.

Those may be pretty good figures, but they don’t mean that executives at Chase and elsewhere have room for complacency. By some measures, business is down. However, look on the bright side: it’s card issuers’ responses to the troubling aspects of their results that are creating some good news for consumers like you.

Credit card interest rates down, offers up

In particular, card issuers would love their customers to get back into the habit of carrying forward balances. That may explain at least in part why credit card interest rates have begun edging down. At the time of writing, IndexCreditCards.com’s rate monitor puts the average for all sorts of cards at 16.65 percent, which is still high, but a little lower than it has been recently.

At the same time, many card issuers are mailing out many more credit card offers than they have in recent years. Chase says its non-interest expenses shot up by 8 percent ($158 million) from the previous year in the division that manages cards, and attributed much of that to increased marketing costs.

Rewards credit cards boost cash back bonuses

It’s not just in terms of the number of solicitations mailed that card issuers are making big efforts. The quality of each credit card offer is also tending to improve.

In particular, the number of enhancements to rewards credit cards‘ programs in recent months has been remarkable, as the most casual trawl through the IndexCreditCards.com news blog would reveal. At the same time, sign-up bonuses, which provide a one-off cash gift for new cardholders, are also in evidence. The Chase Freedom Visa Card and the Citi Dividend Platinum Select Visa Card are two current examples, both offering $200 cash back after first use of the card.

If you have good credit, you’re in the enviable position of being in the target market for credit card companies that are very keen to have your business. So now’s the time to dry your eyes, and seek out the best deals you possibly can.

So you might have expected the flow of promotions and enhancements to dry up at the start of the new year. But you’d have been wrong. Just days ago, the IndexCreditCards.com news blog reported a Citi initiative that allows its customers to pool rewards points using Facebook. Today, it’s a Chase announcement that we’re covering.

Rewards credit cards from Chase get better

On Jan. 5, Chase unveiled its new partnership with Southwest Airlines, which is the nation’s biggest carrier when judged by the number of originating domestic passengers boarded. This allows holders of three of its rewards credit cards to transfer points from the Chase Ultimate Rewards website to the Southwest Airlines Rapid Rewards program. There are no caps on the number of points you can transfer, and each Chase point is worth one Rapid Rewards point, so the value of rewards is maintained.

The three rewards credit cards affected by the announcement are Chase Sapphire Preferred, Ink Plus and Ink Bold. In a press release, Chase identified a number of benefits offered by Southwest, including these four:

1. 3,400 daily flights connecting 72 cities in 37 states (73 cities in 38 states starting next month)
2. Flexible fares
3. First or second checked bag free, subject to weight and size
4. In-flight wi-fi

Meanwhile, Chase says that its Ultimate Rewards program features:

• No earnings caps
• No blackout dates
• No expiration on points earned

Small business credit cards

The Chase Ink brand comprises a range of small business credit cards. The two products involved in this new partnership (Ink Plus and Ink Bold) provide 20 percent off travel costs, but only when redeemed on Ultimate Rewards. The discount applies to bookings for airfares, hotels, car rentals and cruises. Holders can also enjoy airport lounge access.

Chase Sapphire Preferred is a consumer credit card, and holders can earn two points for each dollar they spend on travel and dining. One particularly attractive feature for those who regularly spend time overseas: the card charges no foreign transaction fees.

Balance transfer credit cards: two caveats

Before you get too excited about that weight being lifted from your shoulders, you need to heed three warnings:

1. As with most credit, you can’t always get it if you really, really need it. Credit card companies aren’t crazy (mostly), and they won’t lend to you if they think you are already in financial trouble. The stronger your credit report, the better your chances of approval for the card you want.
2. Don’t see balance transfer credit cards as additional lines of credit. It’s a classic mistake to transfer a balance and then run up others on the cards you zeroed. Instead, use the vacation from interest payments to more quickly pay down as much debt as you can, including that on the new card.
3. Most of these cards charge a one-off fee (often 3 percent) on the amount you transfer. That’s usually added to your new balance, and it’s rarely enough to undermine the economics of the deal, but unless you choose one of the fee-free offers described below, you ought to build it into your calculations. Use one of IndexCreditCard.com’s credit card calculators to model your savings and plan how you’re going to pay down your balance.

Balance transfer credit cards without the balance transfer fee

Sometimes, credit card companies run special promotions during which they waive balance transfer fees. They’re not always available, but you should invariably check for them before you apply for one of these credit cards. Right now, there are at least two such offers, and both are time-limited.

Discover has signaled that its offer is likely to expire on Jan. 31, so don’t delay if you’re considering making an application. Here are some of the headline points for this offer, which is on the Discover More Card:

• No balance transfer fee, annual fee or rewards redemption fees.
• Introductory period of 12 months during which there’s a zero-percent APR on both balance transfers and purchases.
• Discover’s usual rewards program, with cash back that can be earned based on eligible purchase categories.

Of course, before you make any credit card application, you should comparison shop online. If you were to do so at the time of writing, you’d find that Chase is offering a similar deal on its Slate from Chase card. There are no balance transfer or annual fees, and the introductory 0-percent APR lasts for 12 months if you have excellent credit, or six months if you have average credit.

Again, this offer is flagged as being available only for a limited time. So if you’re looking for a holiday hangover cure, you’d better act now.

Rewards credit cards making a difference

The most obvious use for this is probably charitable giving. You can imagine like-minded friends choosing to support their favorite causes, both over a period, and during times of domestic or foreign disaster.

However, Citi says that it offers “millions” of rewards, including travel and electronics. So you could see a band of your pals using the app for organizing a vacation or weekend break together, buying a wedding, graduation, retirement or anniversary gift for a mutual friend or relation, or just getting something you all could use together. You can show what they’d like to receive on their personal ThankYou Wishlist, which could be really useful for wedding, Christmas and birthday gifts.

To celebrate the launch of its innovation, Citi is giving away up to 10 million rewards points between now and 11:59 p.m. on Feb. 3, 2012. If you’re one of the first 4,000 ThankYou members to link the app to your personal Facebook page, you stand to receive 2,500 bonus points.

The mechanics

In order to participate, you must have an eligible Citibank checking account or one of the bank’s rewards credit cards. These include the Citi ThankYou(SM) Preferred Card, the Citi Forward® Card and the Citi ThankYou(SM) Premier Card. If you have another Citi-branded card, check to see if it’s eligible. You must also have enrolled with the ThankYou Rewards program, which you can do at the ThankYou.com website.

Next, visit the Citibank Facebook page, and click on the “TY Point Sharing” tab, toward the top-left. Follow the on-screen instructions to link the app to your page. You’ll need to enter your ThankYou user name and password during this process. You’re then set to:

1. Start a pool of points and establish a goal.
2. Invite as many or as few of your Facebook friends as you like to contribute points.
3. Track how contributions are going.
4. Contribute to others’ pools.

Credit card companies and social networking

Ralph Andretta, head of co brands and loyalty at Citi Cards, commented in a press release:

Citi is constantly listening to our clients as part of our commitment to deliver rewarding experiences that fit into their increasingly digital world. This new app is a first in the marketplace and a fun, flexible way to share ThankYou points – as well as rewarding experiences – with friends and family.

Many credit card companies are currently exploring ways to build customer loyalty and satisfaction through the use of social media. So far, this initiative is one of the most creative, but you can expect many more over the coming months and years. In the meantime, why not see if you can get those 2,500 bonus points?

At Verizon, we take great care to listen to our customers. Based on their input, we believe the best path forward is to encourage customers to take advantage of the best and most efficient options, eliminating the need to institute the fee at this time.

Credit cards and convenience fees

The idea of charging convenience fees for debit and credit card use isn’t entirely new. There’s a good chance you already do so if you use plastic to pay your power bills or for some government services. And back in June 2011, the IndexCreditCards.com news blog reported that UCLA had started charging a 2.75 percent fee to those students who choose to pay their tuition and fees, housing costs, parking permits and so on using certain credit cards.

None of this is good news for credit card companies, which are anxious to encourage people to use their plastic on as many occasions as possible. That’s so they maximize their revenues from the “interchange” fees (the cut of the transaction value) that they receive every time a card is swiped.

Indeed, both MasterCard and Visa ban the levying of supplementary charges (sometimes called “checkout fees”) for card use in their general merchant agreements, and encourage customers to report retailers and others who try to tack them on. What isn’t banned is offering a discount to those who pay by cash, check or PIN debit card. According to Visa’s website:

Retailers can encourage their customers to use other forms of payment, such as cash and checks, and can discount for PIN debit and cash and checks provided that the offer is made to all respective buyers.

Visa also reminds customers that it’s illegal to charge checkout fees for credit card use in most circumstances in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.

Credit cards remain a good way to pay

Given half a chance, many merchants would probably love to cover the cost of processing credit card transactions by levying checkout fees. But it’s unlikely that many CEOs are going to set themselves up for a repeat performance of Dan Mead’s climbdown any time soon. So maybe Verizon has done cardholders (and credit card companies) a favor by deterring others who might otherwise have been similarly tempted to challenge the status quo.

Credit card use “surges”

The Post’s piece cited support from two sources for its contention. First is — appropriately enough — First Data, a research company that tracks how consumers make payments. It found that, compared with the same period in 2010, credit card purchases increased by 7 percent in November, and then “surged” again in the first part of December. And it went on to quote Ed Ferrell, director of the Consumer Reports national research center:

If past behavior is any predictor, the closer you get to Dec. 25 the more likely you’re running into that store and buying whatever you can. Plastic really starts flying more.

The second source was an earlier study by Consumer Reports itself. This found that, although the number of consumers who said they were planning to use credit cards over the holiday season remained steady compared with last year, the amount they intended to charge to those cards had increased by 6 percent. On average, respondents thought they’d add $756 to their card balances this year.

Credit card debt remains an unknown

Of course, a large proportion of those using plastic are likely to pay down their balances in full when their next monthly statement falls due. But some won’t, and it’s the number of those that credit card companies and other industry observers will be watching carefully.

Stand by for close scrutiny of data from many private and public bodies as they report over the coming weeks, and especially of the Federal Reserve’s figures for total credit card debt, which are due to be released in early January for November’s balances, and early February for December’s.

Credit card debt and consumer confidence

Two questions many people are likely to ask themselves when they come to decide how much they should reduce their holiday card balances are:

1. How secure do I feel in my job?
2. How confident am I in my financial prospects?

The answers to both these may be more cheerful now than they have been recently. Everyone knows that the unemployment rate has at last begun to fall, and the optimism that comes with this was reflected in The Conference Board Consumer Confidence Index, which was published Dec. 27. Lynn Franco, director of the Board’s consumer research center, observed in a statement that day:

Looking ahead, consumers are more optimistic that business conditions, employment prospects, and their financial situations will continue to get better. While consumers are ending the year in a somewhat more upbeat mood, it is too soon to tell if this is a rebound from earlier declines or a sustainable shift in attitudes.

Credit card interest rates a factor

People who are considering carrying forward balances for the first time since the credit crunch should bear in mind one factor beyond their immediate prospects: the credit card interest rates they pay may be higher than they used to be. Right now, the IndexCreditCards.com rate monitor puts the average for all cards at 16.71 percent, while those for rewards credit cards average 17.58 percent.

It’s that higher rate that lies behind a piece of advice that’s oft-repeated here: charge to rewards credit cards only those purchases that you can clear at the end of the current billing cycle. Everything else should go on low interest credit cards.

“How much interest will I pay?”

Of course, even relatively high rates are unlikely to prove a serious problem for those thinking of paying down their holiday spending over two or three months. But anyone planning to carry credit card debt over the long term should probably take the costs of doing so seriously. So, if you’re in that position, why not check out this site’s credit card calculators, which can answer a range of questions, including “How much interest will I pay?“

Credit card giving boosted by Capital One

‘Tis the season for charitable giving, so first up is Capital One, which recently reminded its customers of its donations website, www.capitalone.com/give. Generally, credit card companies deduct interchange fees from charitable donations, which means that up to 5 percent of any gift made using plastic goes into issuers’ coffers. But for those using this site, Capital One waives its fees, and 100 percent of your donation reaches the good cause of your choice.

You can search the site’s 1.2 million-strong database for the charity of your choice by name, type of cause or zip code, and you can also redeem points from Capital One rewards cards to make your donation. As Katya Andresen, the chief strategy officer at Network for Good, remarked in a press release:

While offline giving has declined through the economic downturn, online giving is on the rise and people are looking for easy, convenient and cost-effective ways to be generous. The Giving Site is a great tool for consumers and we are thrilled that Capital One is getting extra money to charities at a time when every penny counts.

Too busy to shop? American Express takes it on for you

If you’re lucky enough to have an American Express Platinum Card, your holiday shopping just got a whole lot easier. That’s because the concierge service that comes with that particular card is offering to do all the legwork for you.

All you have to do is send a list of the gifts you require, and the concierge team will research your options, find you the best price, buy what you want on your card, and then make sure the items are delivered in time for Christmas.

Store credit cards in decline

The amount people spent on “private-label” (store and similarly branded) credit cards plummeted by 14.4 percent to $183 billion in 2010, according to a study conducted by Packaged Facts and reported in Marketing Daily on Nov. 30.

Meanwhile the “receivables” (the total credit card debt outstanding) on private-label plastic fell even further, down 18 percent during last year. Much of this may be down to credit card companies “charging off” debt (writing it off their books and passing it on to collection agencies), though the dollar volume spent on this sort of card was also down.

This may well be a good thing. Although private-label plastic often comes with tempting discounts and exclusive offers, mainstream credit card interest rates tend to be lower than those for store cards, and the latter are frequently an expensive form of credit card debt.

It’s generally better to use low interest credit cards — rather than store cards or rewards credit cards — for purchases that you won’t be paying down quickly.

Record-breaking online holiday shopping

ComScore, a research company specializing in the digital world, is tracking online holiday spending. And 2011 is proving to be a bumper year. Between Nov. 1 and Dec. 4, online spending reached $19.57 billion, 15 percent up on the same period in 2010. On Cyber Monday (Nov. 28) alone, it reached over $1.25 billion, 22 percent more than that day last year.

This is almost certainly good news for credit card companies. More and more people are recognizing the superior statutory protections offered to consumers by credit cards — as opposed to debit, gift and prepaid cards — and these can be especially valuable online. So the more people shop on the web, the more the turnover of card issuers is likely to rise.

Credit card debt less of a problem

In its coverage of the data, The Washington Post quoted Jeff Hibbs, an analyst with Moody’s, who predicted that the default rate could drop still further: to under 4 percent from November’s annualized level of 5.2 percent. When you remember that it peaked just 18 months ago at 10.44 percent, that’s a pretty amazing decline.

Of course, much of that fall is almost certainly down to many Americans taking a more responsible attitude to their finances and actively paying down their credit card debt. However, the Post points to two other factors:

• About $75 billion in credit card debt has been “charged off” (written off credit card companies’ books and passed to collection agencies) since the start of the recession, according to Moody’s.
• TransUnion says that over 8 million consumers dropped out of the card market between when the recession began and the end of 2010. Presumably, some of these voluntarily cut up their own cards, while others saw their accounts closed unilaterally by their credit card companies.

Whatever the causes, few would be other than very happy that card debt today is less of a problem for millions of American families than it has been recently.

Credit card offers set to rise?

Credit card executives are as cheered by this news as the rest of us. Their balance sheets have for years been burdened by charge-offs and provisions to cover future charge-offs, and now that they’re largely free of those it’s like a return to the good old days of high profits. Just last week, for example, Discover Financial Services announced that it would increase its dividend to 10 cents from 6 cents, a jump of 67 percent, according to The Chicago Sun-Times.

And, as those executives bellow out their “Happy days are here again” refrain, they’re looking for ways to make the good times even better, both by taking market share from each other, and by growing the overall market by welcoming back into the credit card fold at least some of those whose poor credit scores had previously excluded them.

As was reported in the IndexCreditCards.com news blog a few weeks ago (Credit card debt nightmare to return?): “…between July and September of this year, more than a quarter (25.2 percent) of all new cards issued went to subprime borrowers,” according to data from TransUnion. The Washington Post expects more of the same, remarking: “…potential customers with moderate credit scores should find cards easier to obtain in the coming year.”

True, there’s as yet little sign that card issuers are returning to their pre-credit crunch habit of seemingly mailing plastic to consumers on the basis of a single lending criterion: the ability to mist a mirror. However, the ever-increasing volume of credit card offers being sent to an ever-widening pool of consumers may be reason for concern.

It feels so good to know that for many consumers credit card debt is no longer a major issue. Let’s at least pause to enjoy the novel sensation before re-creating the circumstances that led to problems in the first place.

Credit card contracts impenetrable

Of course, everyone knows that you shouldn’t sign anything that you haven’t read, but that piece of wisdom tends to go out the window when people make credit card applications. Most just cross their fingers that the agreement doesn’t contain outrageous terms, and anyway know that the chances of their successfully negotiating any variation in the standard-form contract are negligible. So nearly all of us simply sign and hope for the best.

Now all that could be about to change. On Dec. 7, the Consumer Financial Protection Bureau (CFPB), a federal regulator, unveiled a draft credit card agreement that it hopes will become a template for future contracts. By comparison with existing documents it’s unrecognizable:

1. It’s short: just 1,100 words across two pages, rather than the 5,000 or so that current contracts average.
2. It’s easy to read: no long words or incomprehensible legal jargon — just plain English.
3. It’s simple to navigate: you can find everything you need to know easily, thanks to its easy-on-the-eye layout.

More than just credit card rates

The top half of the first page concerns different credit card rates and other costs that apply in different circumstances: balance transfers, cash advances, foreign transaction fees, introductory APRs and so on. The lower half has four headings:

1. What do I have to pay and when?
2. What if I pay late?
3. Special promotions
4. How is interest calculated?

Turn over, and there are details of the circumstances in which credit card rates and other charges can change, followed by “Additional Information,” which includes:

1. The company’s rights
2. The consumers’ rights
3. How disputes should be resolved
4. Other terms and conditions
5. Privacy

Credit card companies cautiously welcoming

Credit card companies aren’t always welcoming of government interference in their businesses, but their initial reaction to this suggestion hasn’t been wholly adverse. True, some are concerned that a lack of legalese in their contracts could open them up to expensive litigation. But this was how Kenneth Clayton, chief counsel at the American Bankers Association, greeted the CFPB’s proposal in a statement:

For more than 20 years, the banking industry has strongly supported efforts to provide consumers with a short, easy-to-understand summary of their credit card agreement. The model released by the Bureau is a good first step, but could be made even shorter, as well as less susceptible to costly lawsuits and the higher consumer prices that come from them. We look forward to working with the Bureau to ensure disclosures provide exactly what our customers need and want to know, while maintaining consumer access to competition and choice in the marketplace.

Maybe some day soon virtually all of us are going to understand the card contracts we sign.

After several years of declining use, credit cards are poised for resurgence. Despite the nation’s very rocky economic recovery, consumers appear to have halted their belt-tightening and bank incentives to use credit cards rather than debit are gaining appeal.

- Beth Robertson, Director of Payments Research, Javelin Strategy & Research, Nov. 28, 2011

Credit card use set to explode

The press release from which that quote was taken includes some other interesting predictions. Javelin Strategy & Research forecasts that credit card use for online purchases is going to grow by 63 percent over the five years from 2011 to 2016. The same figure over the same period for debit cards is just 2 percent. “Alternative” online payment methods, such as prepaid cards and gift cards are expected to rise, but even by 2016 they’re set to account for only 19 percent of all online purchases. By that time, Javelin expects, debit cards will account for 21 percent.

It’s not just online that credit cards are coming back into their own. On Dec. 5, First Data Advisors recalled that it had first noted a change in credit card trends back in February, and since August had seen year-over-year growth in credit card spending outstripping that for both signature and PIN debit card transactions. During Thanksgiving Thursday and Black Friday this year, the value of all credit card transactions was more than 10 percent higher than over the same two days in 2010.

Rewards credit cards and credit card offers

So why the turnaround? It would be nice to think that it was because consumers had read “7 ways in which credit cards beat debit cards,” an article that appeared on IndexCreditCards.com just about a year ago. But the real reasons are probably different. Since the Durbin Amendment reduced the cut that banks receive of each debit card transaction (but left that for credit cards at the same level) there’s been a strong reason for financial institutions to push consumers towards credit card use. And that’s most obviously revealed itself in two ways:

1. On Dec. 5, CNNMoney quoted data from Mintel Compermedia that suggested that 1.3 billion credit card offers were mailed to consumers during the third quarter of 2011. That’s an 85-percent increase over the level at the start of 2010.
2. Rewards credit cards are now a lot more generous, by and large, than they were a year or two ago. Credit card companies see these as key ways both to build market share and to drive up their customers’ use of their products.

Credit card debt not yet a problem

Javelin’s study tossed up one troubling statistic. People using debit cards for single online purchases on average spend $58.29 on each transaction. However, those using credit cards in the same circumstances spend $82.10. Now, there could be a number of explanations for this, but one may be that consumers are tempted to spend more when buying on credit.

So how scared should we be by the prospect of Americans getting carried away with their card spending, and loosening their belts too much? Well, not too scared, at least according to research published Dec. 7 by TransUnion, one of the big-three credit bureaus. In a press release, Steve Chaouki, group vice president in the company’s financial services business unit, remarked:

Credit card delinquencies are expected to remain fairly steady in 2012 ranging between 0.69 percent and 0.76 percent — levels far below those typically observed in the last 15 years. In today’s uncertain economy, consumers have found that credit cards are among their most valued assets due to the flexibility they provide. As a result, consumers have made a concerted effort to make on-time payments and maintain relatively low balances. In fact, credit card debt per borrower in the third quarter of 2011 stood at $4,762, approximately $1,000 less than the second quarter of 2009, the quarter in which the recession ended.

So maybe we can relax a little. But the specter of credit card debt still haunts many of us, so if you choose to use your plastic, you may want to do so with prudence.