Credit Card Debt Down, Said Fed

On Friday, the Federal Reserve published its monthly consumer credit report which showed that, in November 2009, Americans continued to pay down “revolving credit,” almost entirely made up of credit card debt. It was the 14th consecutive month that such debt had been reduced.

And, in November alone, consumers reduced their credit card indebtedness by $17.5 billion, which translates into an annualized rate of 18.5 percent. Only another $2.5 trillion to go.

Credit Card Regulation Explained

It’s been a busy week for the Fed when it comes to credit cards. Tuesday, it posted on its website a handy consumer guide to the new credit card regulation regime that comes into force on February 22.

The guide, which reflects changes included in the Credit CARD Act of 2009, provides information under three headings:

1. What your credit card company has to tell you
2. New rules regarding rates, fees, and limits
3. Changes to billing and payments

Credit Card Companies Struggling…Sorta

Meanwhile, BusinessWeek reported earlier today that Jamie Dimon, CEO of JPMorgan Chase & Co., warned investors about the performance of his bank’s credit card operation. He told them that it could lose two billion dollars in the first half of 2010 and set aside money to cover the losses.

He went on to explain that the credit card unit’s performance in the second half of the year would largely depend on the wider economy, along with future decisions that the bank is going to have to make about loan-loss reserves. And he predicted that the unit’s net income could drop by $750 million as a result of new credit card regulation. Other credit card companies could see proportionately similar problems.

But before you mail a care package to Mr. Dimon, bear in mind that the bank as a whole is expected tomorrow to post overall profits of a little over $2.5 billion for the fourth quarter of last year. That’s up more than 300 percent on the $702 million it made during the fourth quarter of 2008.

Credit Card Rewards Points for IRS?

CNN Money ran a piece Monday about American Express’s credit card rewards program. Apparently, Amex members can use their points from the program to pay local, state, and federal income taxes, providing they use one of two designated websites for the transaction.

But don’t get too excited. It takes 200 points to pay a single dollar in taxes. And CNN Money reckons you’d need to have spent a million on your Amex credit card in order to settle a $5,000 tax bill.

Credit Card Rates Too High for Attorney

And finally, Ben Pavone, a California attorney, says he is making a stand against rising credit card rates. Mr. Pavone appeared last week on CBS News’s The Early Show to express his anger at Bank of America, which recently hiked his card rate to 27.99 percent.

He said that he won’t make card payments until the rate goes back down, and that he’ll sue the bank if it damages his credit report by recording his delinquency. He didn’t cite a legal principle that could apply, but seemed confident he’d win, telling one of the show’s presenters:

At the end of the day, the legal system is composed of people, judges, juries, and if they don’t have a good enough explanation, there’s always a legal avenue to find a way to seek justice.

Good luck with that, Mr. Pavone.

Published 01/14/10 (Modified 04/23/12)