You're a Responsible Borrower? 'So What?' Say Credit Card Banks

banks and borrowers paying billsLately, the banks that issue credit cards have seen some significant improvement in the way their customers have been treating them.

But it probably comes as no big surprise to discover that the card companies aren't repaying the favor.

Last week, several card issuers released May figures on the health of their credit card lending. Specifically, each bank spelled out the percentage of their loans that they don't expect to be able to collect (known as the charge-off rate) as well as the percentage of accounts that have payments that are at least 30 days late (the delinquency rate).

Turns out, the numbers of deadbeats and slackers are dwindling. Most issuers saw substantial improvements on both measures. American Express (AXP), Bank of America (BAC), Capital One (COF), JPMorgan Chase (JPM), and Citigroup (C) all saw declines in both charge-offs and delinquency rates. Discover Financial (DFS) also saw delinquency fall, although charge-offs rose slightly.

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As CEO Bill Hardekopf commented, "Fewer delinquencies and smarter lending practices are good for banks." Credit card users, though, aren't seeing much of a break from the improvement in delinquencies and charge-offs.
We're getting punished for good behavior

Over the past several years, the interest rates on credit cards have moved higher, even as interest rates on savings accounts gradually fell. And more recently, card rates have barely budged, with fixed-rate cards not having moved since March, and variable-rate cards falling by just 0.03 percentage points.

5 Things To Watch This Week: New Phones, Banks, Stooges, Aluminum, and Drugstores
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You're a Responsible Borrower? 'So What?' Say Credit Card Banks

After several false starts, Microsoft's (MSFT) best shot at mattering in the smartphone space began with Sunday's introduction of Nokia' (NOK) Lumia 900.

The world's largest software company is paying billions to have the global leader in handset sales back its latest mobile operating system. Windows Phone has won over many originally skeptical reviewers, but will it pack enough punch to woo consumers?

Androids and iPhones have dominated the booming smartphone market: Is there room for a third contender? Even niche pioneer BlackBerry is finding it crushingly hard to compete against the dynamic duo.

Microsoft's tiled Windows Phone interface is clever, but it's really how well the device interacts with Windows programs that will ultimately dictate if wireless customers trade in their Androids and iPhones for the Lumia, which is competitively priced at $100.

It's hard to bet against Microsoft, but the real challenge relates to the question of where Microsoft fits in against the competition:

1. As an open source platform, Android is popular with handset manufacturers because it doesn't cost them anything to offer slick devices that play right into the app-rich Android ecosystem.

2. The iPhones have the high end of the market cornered.

3. Companies used to flock to BlackBerry for email and security purposes, but now corporate IT departments are caving to worker demands to embrace the more popular Android and iPhone platforms.

In short, it won't be easy for Microsoft to stand out, but you can't blame it for trying.

It's going to be quiet early on, but the opening week of earnings season will heat up down the stretch when banking giants JPMorgan Chase (JPM) and Wells Fargo (WFC) report on Friday.

Analysts see the companies moving in different directions. They see JPMorgan's profitability declining by 10%, while Wells Fargo comes through with a 7% improvement on the bottom line.

Investors will be tuning in for more than just the net income figures, of course. Are banks lending again? Are consumer default rates improving? There have been plenty of upbeat economic indicators announced in recent weeks, and now we'll see if it's trickling down to the banking level.

Many classic Hollywood franchises have been retooled and revived in recent years: Now it's time for some slapstick fun.

20th Century Fox is hoping that nostalgic audiences and new fans alike flock to see The Three Stooges when it opens on Friday. The irreverent Farrelly brothers -- the two guys that brought you There's Something About Mary and Dumb and Dumber -- directed and co-wrote the movie.

After a terrible 2011 at the local multiplex, 2012 is shaping up to be a bounce-back year for exhibitors. After The Hunger Games scored the industry's third-largest opening weekend last month, it's clear that audiences are ready to come back to the movies.

Aluminum may not sound like a sexy industry, but Alcoa (AA) -- short for Aluminum Company of America -- has turned the sustainable metal into a sustainable business model.

Yes, sustainable. Alcoa claims roughly 75% of all of the aluminum that's ever been produced since 1888 is still in active use today.

Alcoa has 61,000 employees in 31 different countries, making it a truly global enterprise. Unfortunately for folks tuning in to the company's quarterly report on Tuesday, analysts see the company posting a small loss for the period.

Drugstore operator Rite-Aid (RAD) is one of the few companies reporting earnings this week.

Unlike Alcoa's unusual unprofitable turn, investors are used to Rite-Aid's red ink. You have to go all the way back to the summer of 2007 to find the last time that the leveraged pharmacy chain posted a profit. We're talking about 18 consecutive quarters of losses.

So what are analysts expecting to see when Rite-Aid steps up on Thursday with its latest financials? Do you really have to ask? Wall Street's targeting a loss of 14 cents a share.

With average interest rates hovering in the 14% range and even low-rate specialty cards still fetching double-digit rates, it's clear that banks are doing their best to collect as much interest as they can in light of new consumer protection regulations that limit their ability to raise rates on existing cardholders.

What that means is that no matter how favorable the economy may get, you shouldn't expect to see card rates go down, making it that much more important to avoid carrying a balance on your cards if at all possible.

Motley Fool contributor Dan Caplinger thinks banks should share the wealth. You can follow him on Twitter here. The Motley Fool owns shares of Bank of America, JP Morgan Chase, and Citigroup. Motley Fool newsletter services have recommended writing a covered strangle position on American Express.

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