So in case you haven’t noticed, not much has been going on in the FABB.log, and it’s because we’ve been directing more energy into improving FABB. Shortly, we’ll be changing the focus of our blogging from consumer issues like personal finance and checking account information to a more Facilitas-development-centric format.

I’ve learned a lot this year about personal finance from considerate and insightful bloggers like Trent Hamm, J.D. Roth and Jim Wang, and about consumer finance from sharp and industry-changing writers like Jeffry at The Financial Brand, and Jim & Eric at Netbanker. I’ve been lucky (as we all have) to watch the future of consumer finance become the present as the folks at companies like Mint, Wesabe, and Quicken have released and improved great online money management tools.

It’s a really exciting time to watch and experience how technology is changing the way we think about and work with our finances. I hope you’re enjoying it too.

In the mean time, if you’re still jonesing for some FABB, we’re tweeting @FindABetterBank about consumer finance, as well as the on- and offline finance world. And if you’re a bank or credit union employee, we’re @FABB_Connect, tweetin’ about consumer finance industry issues that pertain specifically to you. You can also check out our old posts through the various means of navigation on the right.—->

Be well, and I can’t wait to share with you what we’ve been working on in the FABB Labs…

Follow us on Twitter here.

Now, all the bills came down on him together, all the bills he had been contracting for the years of his marriage, and which the creditors sent in with a hasty unanimity. Their amount was frightful. Barry was now bound up in an inextricable toil of bills and debts with mortgages and insurances and in all the evils attendant upon them. And Lady Lyndon’s income was hampered almost irretrievably to satisfy these claims.

I hope you’re having a good weekend.

[Images from Barry Lyndon (1975) dir. Stanley Kubrick. (imdb)(wikipedia)]

Over the past decade, credit card debt has increased by 25% in our country. Nearly half of all Americans carry a balance on their cards. Those who do carry an average balance of more than $7,000. [...] Millions of cardholders have seen their interest rates jump in just the past six months. One in five Americans carry a balance that has been charged interest rates above 20%. One in five.

- President Obama

I

In the recently passed Credit CARD Act of 2009 (1), Congress set into law some requirements for how credit card issuers must operate. These requirements cover billing procedures, internal procedures, and consumer access to account information and payment methods. Regulation of the terms of teaser rates and the disclosure of information to consumer reporting agencies will also effect advertisement and inter-bank communication, respectively. This broad regulation will limit certain ways in which these companies make money from their customers.

…[W]e’re not going to give people a free pass; we expect consumers to live within their means and pay what they owe. But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives.

- President Obama

Since the passing of this act, credit card companies have increased rates and fees, including the required minimum monthly payment, the transaction fee for balance transfers, and the interest rates of even more of their customers. The aim is to both make more money on current customers as well as set the standard fees high enough that customers who join after the CARD Act comes into effect (February 2010) will still help their bottom line. Right now it’s not looking great for card issuers. They are posting record-high 10.4% (3) losses on credit card debt due to, among other things, a high number of customers defaulting (4). Understandably, these companies want to avoid losing even more money.

Samuel Wang, vice president for public affairs at Citi, would not disclose details of the rate increase but said the company adjusts pricing as part of a regular review of accounts. ‘These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit,’ he said.

- Nancy Trejos

Members of congress have publicly stated their frustration with these new fees. Senator Charles E. Schumer, addressing what he calls the money these companies are “wring[ing]” out of their customers, said “It is against the spirit of the law, and it’s just plain wrong” (Trejos, cited above). DR from DoughRoller gives a good explanation of the banks’ reaction to the the Credit CARD Act in a post regarding the Act as it appeared in 2008 (5):

[The Credit CARD Act] won’t stop credit card companies from making the profit the market allows them to make. What it will do, however, is change how they do it. The point is that credit card companies make what the market will bear.

- DR

The questions now are:

• What will the market bear?
• How many ways can fees be tacked onto contracts before the card issuers lose customers?
• And most importantly, at what point will people stop opening poor credit card accounts?

II

While fixing this problem is far from easy, minimizing future problems is necessary for promoting stable relationships between financial institutions and their customers. As covered earlier in FABB.log, members of the AIGA Design for Democracy suggested a “Credit Card Facts Box” similar to the nutrition facts found on the side of food items we buy at the grocery store. While a simpler, common-language design alone cannot change the ways in which people use credit, a clear presentation of facts can lead customers into a better understanding of the contracts they sign and prepare them to successfully manage their accounts.

Unfortunately, incorporating the “Facts Box” into the current legislation is out of the public’s hands, and an equivalent measure is not stated explicitly in the passed Credit CARD Act. I think it’s safe to assume that major banks won’t present their customers with a “Facts Box” on their own accord, so while a standardized, intuitive design of contract descriptions is practicable, it’s far from probable.

The evidence so far suggests that the credit CARD Act is likely to bring about moderate, and even positive, changes. Card issuers, after all, need to retain customers. Any bank that attempts to pad its bottom line by, say, levying large annual fees will likely see its customers flee to credit unions or to banks that emulate the credit union model.

- Ryan Bubb & Alex Kaufmann

It is possible that the Harvard doctoral candidates in Economics quoted above are right in saying that large annual fees will turn off customers from a bank, but I believe that their prediction reflects the theory of a perfect market than the real influences that effect how people pick a financial institution. These infliences include friends’ suggestions, obvious proximity to a branch, advertising and marketing, and imperfect knowledge in general. And when we recognize the impact of these factors, it’s not surprising that many people will open accounts at popular financial institutions that put money into advertising campaigns rather than using it to offer better customer service or lower “service” fees.

The solution is far from clear, but now seems as good of time as any to put great consideration into the concerns of many Americans who can’t find a good credit card and settle for a mediocre one.

Notes

1. Summaries of the Credit CARD Act of 2009 are offered by GE Miller (here) and by the Congressional Research Service (here). The full bill can be found here.
2. Please note that emphasis (bold) in all quotations in this post are mine.
3. Stacy-Marie Ishmael discusses this statistic in her blog post “US credit card losses hit record, Fitch says” (The Financial Times).
4. See the New York Times Magazine article from May, “What does your Credit Card Company Know About You?” for a compelling case-study and investigation of the methods employed by banks to minimize customer defaults and maximize debt payment.
5. The Credit CARD Act has been floating around Congress for awhile. [See earlier versions from the Senate (2008, 2005, 2004) and from the House of Representatives (2007, 2006)]

“FindABetterBank Finds a Bank that Suits Your Needs”
 
 

“…deciding where to bank just got that much easier.“

 
 

“10 Useful Comparison Sites You Have To Bookmark”
 
 

“Find A Better Bank helps you find an ideal bank account.“

Cool Beans! Thanks for checking us out!
 
 

In this commercial, a man whose waist is roughly the size of a coffee mug gets into an elevator and is greeted by his coworker who is holding a “Wake-Up Wrap” from Dunkin’ Donuts. Tiny-Waist Man eyes the egg and cheese wrap as if he were seeing the sun for the first time, and his coworker asks, “Tightening your belt?”

The commercial is silly, but it reminds me of an important lesson I’m learning — trying to save money should not make you miserable. It’s better to feel financially secure while at the same time enjoying the great things in life, like eating, drinking, entertainment and spending time with friends. And to be able to enjoy life, living financially-minded can’t be stressful. The following is a link-round up of great blog posts that describe do-able ways to live the frugal life. Maybe you can fit them into your money-saving techniques–but don’t stress it.

—————————————————————————————————————————————
 

55 Best Ways To Save Money: Frugal Ideas From Our Readers

(The Digerati Life)

This post has a great list of reader-suggested ways to save money. I’m a personal fan of the first idea, “1. Make a budget. Use money management tools that will help you control your spending better. Some good, free choices? Mint and Wesabe.” There’s a full array of suggestions, from entertainment to groceries to traveling–which ones will work for you?

Stop Drinking Coffee? Never! Drink Better Coffee and Save Money with Home Roasting

(20 Something Finance)

Let’s be real, coffee is not one of those things we can easily skimp on. So I’m all for a good cup of coffee in the morning at half the price, even if it means making it myself. New to home roasting? Check out this link to see how easy it is and how much money you’ll save by doing it.

Tips for Saving Money: The Frugal Mindset

(The Smarter Wallet)

You know you want to live on a smaller budget…Can’t bring yourself to figure out exactly how? Maybe there’s one BIG and relatively easy way you can change your spending & saving habits to develop a larger “nest egg.” In his post, JT offers clear and helpful tips on how to organize our financial needs and mentally prepare ourselves for the task without going crazy.

For their Op-Ed piece “Healthy Credit,” The New York Times enlisted the directors of Design for Democracy, a “nonprofit group that promotes accessible and transparent civic communications,” to design a Credit Card Facts box much like the Nutrition Facts Box made standard with the Nutrition Labeling and Education Act of 1990. Here are the results:

While a Nutrition Facts box doesn’t tell us everything we should know about a food product, we, similarly wouldn’t expect a Credit Card Facts box to tell us everything. But requiring credit card companies to highlight the most important aspects of a credit card agreement would pair nicely with the recently signed legislation designed to protect consumers against unfair fees and penalties (recently described in the article “What the Credit Card Holder’s Bill of Rights Means to You” over at Mint.com). We at FABB support the NYTimes and Design for Democracy’s “Credit Card Facts” box design, and hope that this design or a similar one will help both the consumers with credit cards and the companies who offer them by clarifying the contractual agreement before costly misunderstandings occur.
 

Here’s a bit of Seth Green’s ’skit’ in the show, where he discusses the fundamentals of a smart mortgage from his MTV-style “crib.” If the rest of the show is anything like this, I’m sure it will be great.

UPDATE: Michael over at Money Musings has a pretty funny rant titled “Un-Broke? How about Un-Watchable?” regarding the show. A quote:

And the Jonas Brothers tutoring us on stock-market indexes?

THE JONAS BROTHERS?

Are you freakin’ kidding me?

Not going to lie, I didn’t tune in myself. And while I can agree that most television is designed for entertainment rather than education, I gotta say the above Seth Green vid still makes me happy.
 

Not necessarily. It turns out that when I called a number of banks and spoke to employees about it, each bank just had a different fancy names for their checks, no matter what kind of checks they were. The name was either a cover-up for basic checks — usually green, yellow, or a ‘delicate, pastoral’ blue–or similarly unnecessarily elaborately named designer checks–which really just means checks with pictures of Looney Tunes characters, Harley Davidson motorcycles, or very scenic…uh…scenes? (These are all postmodern gestures by the check-printing companies à la Richard Prince, I’m sure.)

The amount by which designer checks cost more than the basic checks depends on the bank and the check-printing company, and you might find it worth it to drop a couple extra dollars for the check set with beautiful mustangs. (One of the customer service agents told me there was only a $4 price difference between them, so “why not get the Disney checks?“)

Here’s the “Checks Name Rundown,” the result of conversations with a number of people at banks that offer free checks with at least one of their accounts. At the end of the day, I realized that even though there are a number of different check-printing companies, their offerings are nearly identical across banks. I also remembered, warmly, why I never use checks–because “delicate, pastoral” blue just isn’t my style. (The following links go to accounts with free checks at each bank.)
 

Check’s Name Rundown

 
- It turns out “safety” checks offered by Susquehanna Bank are actually safe. They’re printed in such a way that any solution that dissolves the ink on the check also leaves obvious traces, disallowing some forger from turning a check you wrote into a ‘blank check’ and sending a large amount to his Swiss bank account. Disappointingly, this is par for the course–a standard feature across all checks–so while it’s a legitimate “safety” precaution to have checks as cool-sounding as “safety” checks, they’re virtually identical to Beneficial Bank’s “Wallet Checks” and to Fifth Thirds Bank’s “custom” checks (which is just a misleading name for standard checks, if you ask me).

- There are two style-types of issued checks–”single” and “duplicate” styles. A “single”-style checkbook is a book of only checks, while “duplicate”-style checkbooks provide carbon copies of checks for your records. This recording technology is spectacular compared to anything–except for, of course, online banking and how it records debit card transactions automatically. (Sorry, had to go there.) Single style check names run the gamut from “wallet-style stock checks,” at Banner Bank in Walla Walla, WA, to the ever-so-fancy “basic check”, at RBC Centura in North Carolina.

- The number of checks in an introductory packs of checks can vary greatly. An “introductory” set of checks from Harris Bank include a whoppin’ 125 checks, while the “initial” checks at Bank of Internet and “starter” checks from 1st National Bank of Texas each include a measly 50 checks. If first impressions really are everything, Harris Bank would definitely be taking me out for dinner and a movie tonight.

 
The only check type that really sounded great to me was the “standard” check offered by First Tennessee Bank, but I couldn’t tell whether or not the customer service agent was excited about the check design too (pinstripe borders!) or just trying to lure me into buying them. Either way, I’ll have pinstripe-bordered checks stuck in my mind all night as I drive my Harley Davidson down to Disneyland.