Inside the Black Hole

There have been some huge changes in the payment card landscape in the past few months that have left none of the major card types unaffected. Many credit card users, for example, are enjoying a huge rise in the availability and quality (especially the latter!) of rewards programs. Similarly, the quality of prepaid cards has vastly improved in the past few months, to the point where AmEx is now offering a largely fee-free prepaid card, which can also help consumers with good track records but poor credit scores, upgrade to a charge card. Debit cards, however, have gone in the other direction in the wake of the Durbin Amendment, as issuers are doing their best to drive consumers away from debit and towards using one of the other card types.

So how does all that affect us? Should we be making any adjustments to our payment preferences in response to everything that’s been going on lately? Well, the answer would depend on your particular circumstances. If you had a high credit score, for example, you would have all options available to you, but that would not be the case for someone with a sub-par score. Either way, you would need to know the pluses and minuses of the card types available to you, so that you could pick the one that would serve you the best. To help you do that, I have made a comparison between the credit, debit and prepaid cards features that have the biggest impact on their users...

That is the thrust of Equifax’s National Consumer Credit Trends Report for March. The report is consistent with other data that have shown a continual improvement in the health of Americans’ finances over the course of the past couple of years and an easier access to new credit. We learn that, overall, the aggregate amount of consumer debt in the U.S. at the end of the first quarter of this year was lower by 12.1 percent from its peak level reached in 2008 and keeps falling, even as consumers are once again beginning to take on more new credit.

While there has been an improvement in all consumer credit segments, the biggest gains have been registered in the various credit card debt management categories. The aggregate amount that consumers owe on their credit cards is well below its pre-recession high, delinquencies are at an all-time low and defaults are at a five-year low. Let’s take a look at Equifax’s numbers...

Well, according to a recent Federal Reserve survey, all of these activities constitute mobile banking. Using your phone to locate the nearest ATM is also banking, we learn. I’ve long had an issue with the prevailing definitions of mobile banking and mobile shopping and they still just don’t make sense to me.

The way I see it, both banking and shopping have to do with moving money from one place to another. It’s really that simple to me. The act of accessing your account (through your phone or otherwise) to check your balance or just because you have nothing better to do is not banking, it’s information gathering. And the same applies to receiving text alerts reminding you that you had scheduled a rent payment for tomorrow. Yes, the text is a service provided by your bank, but it is not a financial one. Let me put it this way: if you had signed up for, say, a Bank of America newsletter, you could learn, among many, many other things, how to stop leaky ducts and how to keep your attic cool. This is incredibly valuable information indeed, but is it banking?

The definition issues aside, the Fed survey does provide plenty of interesting data on how consumers use their mobile phones to interact with their financial institutions and it’s worth a look...

FOXBusiness’ Jennifer Booton has written an excellent account of the big global credit card companies’ efforts to penetrate markets in developing countries, which have until recently had to rely exclusively on cash for payment. We learn that Visa and MasterCard have both partnered with telecommunication companies to enable consumers in Africa, Asia and South America to use their mobile phones the way people in developed countries use their bank accounts and credit cards.

These developments are good news for people living in underdeveloped countries who will find that being able to pay for things electronically is convenient, while reducing the risks associated with carrying cash around. Actually, people have been finding this out and have indeed liked the experience. Kenya’s M-PESA has been providing mobile payments services to consumers in its home country for more than five years and has since expanded in several other markets. So it is great that the credit card companies are finally showing interest in the underdeveloped parts of the world, but what took them so long? And how would they fare?

The aggregate amount of student debt in the U.S. is growing at an accelerating rate and is outpacing the growth of the other consumer debt categories; the hacking of 1.5 million credit and debit card numbers should prompt us to examine our monthly statements for “hot tubs and flat screens that [we] didn’t order;” the combined credit lines of newly-issued credit cards have increased by $20 billion, compared to last year. These are a few of the fascinating and sometimes unexpected statistics that are represented in various visual forms in the fifth edition of our new column – The Month in Numbers.

We continue to have a lot of fun with our monthly column and your response has been encouraging, so we are considering making it a weekly feature. That hasn’t been decided yet, but the number of high-quality and well-researched credit card-related infographics, videos, slideshows and plain graphics produced each month is so huge that picking the best of them once a month is no mean feat. As always, we are greatly reliant on your help, so keep letting us know what you think of our list and keep sending us your monthly favorites!

So here are our picks for April 2012...