Bank Makes Rewards Harder to Earn With Card Changes

Although credit card companies try to promote their reward programs as valuable benefits to their customers, new reports suggest they less benefits to consumers then you would think. Earlier today WalletPop.com put together a consumer warning post about CitiGroup and how they are making it difficult for their customers to take advantage of their so called “rewards” program. Check out a section of their article below.

We've written recently about some tricky things credit card companies do that can whittle away at the value of your hard-earned rewards, and recent news reported in the Consumer Reports blog illustrates that banks are still trying -- and trying very hard, in some cases -- to keep you from getting those perks.

Consumer Reports says that Citigroup recently switched most holders of its Dividend Platinum Select MasterCard over to its Citi Dividend World MasterCard. One major difference between the two cards is that the Platinum Select offered 2% cash back in several commonly used retail categories like supermarkets, gas stations and drugstores. The World has a different rewards structure that puts the onus on the customer to keep earning their rewards.

With the World rewards program, users can earn 5% cash back on hotels and rental cars. This blog post says most of the new rewards are travel related, which is in line with the new card's enhanced benefits of trip insurance, lost-baggage reimbursement and the like. But if you got the card hoping to earn a nice cash-back bonus at the grocery store, you're out of luck. But there's an even bigger caveat: The reward categories change every quarter, some have lower redemption rates (in line with the old 2% rate) and - here's the kicker - customers have to remember to sign up for them every three months. No sign-up, no rewards.

Linda Sherry, director of national priorities for advocacy group Consumer Action, blasts the practice. "The idea of having to contact the company at quarterly intervals to continue your rewards is inconvenient and seems designed to avoid paying rewards," she told WalletPop via e-mail. What's more, she added, there's nothing in the CARD Act that prevents card issuers from pulling these kinds of switcharoos after you've already gotten established with your card. "This is precisely the reason we believe restrictions on one-sided contractual agreements is so important," Sherry said. "The current practice leaves consumers as sitting ducks."

Perhaps even more frustrating to the changes in the reward program is the fact that Citi issued new card numbers for every customer. In other words, if you had the old card and had any auto-bills or recurring payments set up, you'll have to tell all of those

Continue reading at WalletPop.com…

U.S. banks may end free checking accounts: report

Banks seem to be tightening up their financial purse strings lately. The latest report from Reuters.com states banks are doing away with free checking accounts. It further explains that this move is expected primarily to hurt retail businesses who could be asked to pay new monthly maintenance fees on their basic accounts that do not generate a lot of activity. According to Reuters banks are incurring expenses of $250-$300 a year to maintain each of the approximately 200 million checking accounts. However, some people disagree with this assessment. Don’t banks borrow against the money in checking accounts? And aren’t they already charging customer’s overdraft fees, ATM fees, and dozens of other outrageous fees? What do you think? Are you with a large bank or do you prefer a credit union instead? Let me know your thoughts on my Facebook or Twitter.

Bank Profits Rise, But So Do Bad Loans

Lately major financial institutions have been boasting higher profits lately to assure consumers they have rebound from the economic crisis. However, a new Federal Deposit Insurance Corp. report is asserting that although banking profits have increased, so have the number of bad loans.

Even though profits increased sharply, troubled assets continued to grow. According to the Workshop's analysis, 411 banks have a "troubled asset ratio" of more than 100, up from 389 banks at the end of December. In other words, they had more problem loans and foreclosed properties on their books than capital and loan loss reserves.

While not an official FDIC statistic, the troubled asset ratio has proven to be a strong indicator of bank stress. Of the 81 banks that have failed so far this year, nearly all had trouble asset ratios above 100, according to their latest FDIC reports.

One especially troubling fact: the FDIC reported that mortgage delinquencies hit an astounding 10.8 percent in the first quarter, up from 6.4 a year ago and just 1.2 percent three years ago. Those numbers may portend more defaults and foreclosures over the next several months.

IRS 'Wealth Squads' On The Way

From Forbes.com:

Those who by anyone’s measure would be considered wealthy should be on notice: How you acquire and now maintain the wherewithal to be so labeled may soon be called into question by the Internal Revenue Service. That’s not to say that the questions can’t be answered and the matter closed with no further tax due, but the means to that end could get complicated.

Last Fall, IRS Commissioner Doug Shulman unveiled his vision for a Global High Wealth Exam Group--the latest addition to the agency’s arsenal of compliance strategies. Its goal is to ensure that these high-end Form 1040 filers are not shirking their federal tax responsibilities. While the exact amount of “wealth” that will arouse IRS interest was not disclosed, the Commissioner suggested a threshold in the neighborhood of tens of million of dollars. According to the most recently released IRS estimates, in 2004 there were approximately 47,000 individual taxpayers with a net worth of $20,000,000 or more.

That some of these taxpayers play fast and loose with regard to federal taxes should come as no surprise, given the deluge of news stories last year revealing the extent to which the well-off in the U.S. as well as other countries secreted assets in offshore accounts to avoid the prying eyes of revenue bodies worldwide. By last November, in the U.S. alone, almost 15,000 individuals had “voluntarily” reported to the IRS previously undisclosed foreign bank accounts.

However, as troublesome as this behavior is, it alone is not the principal factor for this new program. Instead, it is the scope and complexity of the tax planning in which such individuals engage that challenges the current exam strategy and dictates a different approach for certain wealthy taxpayers. Gone are the days when Forms 1040 filed by such taxpayers reported for the most part, wages, dividends, interest, capital gains, and perhaps distributions from a law firm, accounting firm, business partnership, or small business corporation. Instead, they now often reflect the taxpayer’s participation in such ventures as multi-tiered partnerships, trust arrangements, private equity and hedge funds, and private foundations. To complicate matters from an IRS exam perspective, many of these entities in whole or in part are foreign based.

New Credit Initiative to Boost Lending to Small Businesses

Owning your own business is a rewarding path for many people toward wealth and personal success. Small businesses are what drive the national economy and that’s why I support more funding toward small business lending. It would be especially rewarding to see more funding extended to businesses that otherwise have difficulty with funding from large banks.
The House of Representatives is expected to take action on a proposed $2 billion grant initiative that could bring about billions in lending to small businesses, especially women and minority owned businesses that might be having a hard time getting credit. It’s for these reasons I enjoy sharing with others my personal success story.

The initiative, modeled after state capital access programs, would require states to pay $10 of lending for every $1 of federal funding they received. According to the Wall Street Journal, this new policy will work alongside the Treasury’s small business fund. The small business fund is specifically designed for community banks that are based in neighborhoods, as opposed to the larger Wall Street financial firms.

The real question is whether this proposed fund will truly help increase lending or if it will exhibit some of the same weaknesses as the Troubled Asset Relief Program (TARP)’s capital purchase program -- which has not necessarily seen an increase in lending as was expected. Hopefully, there will be safeguards in place to make sure the initiative delivers results. Our economy would also benefit from the creation of much needed jobs through this measure.

5 Ways to Curb Bank Overdraft Fees

While some bank account holders may be happy to see the end of overdraft fees, other consumers are upset they may have their card declined for important bills if there are insufficient funds. However, SmartMoney.com says this is not a good enough reason to opt for overdraft protection, and is offering five ways to curb overdraft fees.

Carry backup cards

Cardholders who don’t opt in for overdraft coverage but carry borderline balances still may get turned away at the register. Consumers should keep at least two or three backup cards in their wallet and a little cash just in case, says Odysseas Papadimitriou, the CEO of Evolution Finance, which publishes CardHub.com, a credit card comparison web site. “Keeping an extra one or two credit cards on hand can help prevent running out of payment options if some sort of fraud-related hold strikes your account,” he says.

Balance your checkbook

To avoid needing a backup, account holders should keep an eye on their account balances, says Papadimitriou. They should check weekly, or even daily if they’re operating on the edge, he says. Then, cardholders should be vigilant about withdrawing funds from retail stores that offer cash back on debit-card transactions. Although banks will generally alert customers if they’re about to go over their limit at ATMs, in-store debit withdrawals typically won’t trigger any overage notification, Papadimitriou says. It’s still not clear whether this problem will be fixed when the overdraft coverage opt-in provision takes effect, he says.

Sign up for payment alerts

Cardholders given to procrastination should consider signing up for payment alerts, says Papadimitriou. Most card issuers, including JPMorgan Chase (JPM: 39.04*, +0.10, +0.25%), American Express (AXP: 39.15*, +0.14, +0.35%) and Bank of America, have long offered to alert their customers when account overages occur or when payment due dates are imminent. “We’re trying to help customers to reduce overdraft fees,” says a BofA spokesman. “We don’t want them to buy a $40 cup of coffee.”

Continue reading at SmartMoney.com…

Banker Tax May Mean Less Money Available to Lend, Yingling Says

Americans everywhere cheered when Obama proposed a fee from the biggest banks who borrowed taxpayer money through the TARP program, but is the tax really such a good idea? Edward Yingling, CEO of the American Bankers Association has expressed concern that taxing the largest banks will stagnate their willingness to lend to customers, making economic recovery all the more difficult.

The $90 billion bank tax proposed by President Barack Obama may reduce the amount of money banks can lend by $63 billion a year, the president and chief executive officer of the American Bankers Association said.

The administration’s tax is expected to raise $9 billion a year over 10 years, said Edward Yingling, president and CEO of the ABA. Each dollar in bank capital supports $7 or more in lending, Yingling said in an interview. Some banks leverage money further, with each dollar supporting $9 or $10 in lending, he said.

“It’s a concern,” Yingling said. “Nine billion dollars could actually mean $63 billion less in lending.”

The administration is sending a “mixed message” about banks needing to lend while setting requirements that make lending harder to do, Yingling said.

Continue reading at Business Week…

Bankers in Favor of Paying Global Fee

From FT.com:

Some of the world’s most prominent bankers have come out in favour of a global bank wind-down fund, a concession from the industry after weeks of fighting proposals for new taxes in the US and Europe.

Josef Ackermann, chief executive of Deutsche Bank, told the Financial Times on Friday : “To help solve the too-big-to-fail problem I’m advocating a European rescue and resolution fund for banks. Of course, the capital for this fund would have to come from banks to a large degree.”

Bob Diamond, president of Barclays , also supported the idea of a global levy, which could see banks contribute tens or even hundreds of billions of dollars over a period of years.

“I think every G20 country would like to have an insurance scheme that would help cover the cost of any future bank failure,” he told the FT at the World Economic Forum in Davos. “A co-ordinated global system is preferable to an unlevel playing field.”

Bank Tax Unfair, To Have Serious Effects - Bank Group

From CNN Money:

U.S. banks are worried about the impact of a planned tax on lenders and believe other industries that received federal money, such as car makers, should be targeted, a top economist at a banking group said Friday.

"We're concerned that such a high tax directed at the wrong parties will have serious consequences," James Chessen, Chief Economist at the American Bankers Association, told a press conference presenting ABA's latest economic forecasts.

Thursday, President Barack Obama said banks have a responsibility to make taxpayers whole for the financial-sector bailout and should pay a proposed tax by rolling back big bonuses.

If approved by Congress, the new tax--which the White House calls a "financial crisis responsibility fee"--would force about 50 banks, insurance companies and large broker-dealers to collectively pay the federal government roughly $90 billion over 10 years.

IRS Investigates Man Running Secret Bank

The Internal Revenue Service has brought charges up against a Washington man who was operating a "warehouse bank" from his own home. According to court documents he had taken in over twenty eight million dollars from people across the country looking for a "discreet" bank account. According to an IRS investigator, Robert Arant had hundreds of customers who used his banking services to conceal assets for the purpose of evading taxes. A civil complaint was brought up against Arant for promoting abusive tax shelters and unlawfully interfering with Internal Revenue Service laws. For more information visit WTOPnews.com.