Credit Cards 101: Responsible Credit Cards for Young Green Americans

www.freefoto.comAccording to a recent poll, 34% of Americans aged 18 to 50 do not have a credit card. For most young people, the word “finance” conjures up little more than images of suits on Wall St and a dangerously low checking account balance. Fears of crippling debt (often the result of massive student loans), predatory mega-banks, and identity theft deter us from applying for a credit card. Paying for all of your expenses with cash is a responsible option, and it is entirely possible to live a life without credit. There are, however, many advantages to educating yourself about credit cards and using them wisely. They’re small, convenient, and easy to monitor, and they allow us to accomplish a range of activities that we couldn’t with just cash or a debit card. Here are a few examples:

–          Housing – Before you sign a lease on a house or apartment, your landlord will want to check your credit as a gauge of how good you are at paying your bills. If you have bad credit or no credit, a landlord will be very wary of renting their property to you. Utilities companies also use credit as a gauge of financial responsibility. Even if you can convince a landlord to rent you their property, convincing the electric utility to turn on your power without good credit could be a real challenge.

–          Employment – Employers may check candidates’ credit to judge financial responsibility. Your credit is a reflection of your expenses, and many employers want to make sure that you are not in serious financial difficulty that could compromise your work.

–          Travel – You will need a credit card to rent a car, and book a hotel if you plan on doing any traveling. This is to cover the costs of any incidental damage to the vehicle or room.

–          Loans – Having a good credit history is crucial for securing longer-term loans for a variety of purposes. This could include a mortgage, financing a car, or even taking out a loan to start your own business. Lenders will be more willing to do business with you if they can see that you pay your bills on time.

–          Get Free Stuff- Who doesn’t love gifts? As an incentive to use their credit card, many financial institutions offer rewards to their customers. Based on the amount you spend, you can receive cash back or points that you can redeem for merchandise, travel expenses, and a wide range of offerings.

If you think you may be interested in any of the things above, then it might be time to seriously consider building a good credit history. Your credit score is a number that is calculated based on your expenses, and is meant to reflect how quickly and thoroughly you pay your bills. Your credit score is shared with anyone who might be in a position to lend you money, and by paying your balance in the full amount, on time, you can make the most of your borrowing abilities. To be a responsible credit user, you must internalize one golden rule: don’t spend more money than you have. This will help you keep track of your spending and avoid debt that can add up rapidly. It requires organization and self-control to responsibly use credit, but you can increase your long-term purchasing power to a large extent.   Responsible spending is also good for the planet; purchasing only what you need lowers your impact on the environment.

At Green America, we encourage responsible consumers to obtain “green” credit cards, offered by community investment banks and credit unions. These cards are unique in that they donate a portion of their transaction charges to organizations that support the environment and communities in need. Most major credit cards, by contrast, direct their transaction charges to executive compensation or investing in environmentally harmful activities, like coal-mining. If you are thinking that using credit is the right next step, we urge you to look at our list of recommended green credit cards. You can begin building a stable financial future for yourself, prevent your purchases from supporting harmful mega banks, and support the environment and communities in need.

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The next step is up to you: by learning to responsibly use credit and choosing a card that benefits the people and the planet, you can be a part of the generation that changes the credit industry for the better! If you’re curious to learn more about credit, here are some great resources.

A New Years Resolution Green Americans can Get Behind

Though the holiday season is full of friends, family, and good food, the prospect of a New Year’s resolution looms like an important deadline. Whether it’s taking steps to improve your personal health or checking an item off of your bucket list, our brains tend to resist serious changes when faced with periods of comfort, satisfaction, and routine.

There’s plenty of science behind this too – researchers have substantial evidence that we are at odds with our desire to change our behavior. According to a survey of 3,000 people conducted by UK psychologist Richard Wiseman, 88% of proposed New Year’s resolutions resulted in failure. An experiment conducted by Baba Shiv of Stanford University further illustrates the point. Students were split into two groups and told to remember either a two-digit number, or a seven-digit number. With their assigned number in mind, the students were then told to walk down the hallway where they were presented with a choice of snacks: either chocolate cake or fruit salad. Shiv found that the students trying to remember a seven-digit number were almost twice as likely to choose the chocolate cake over the fruit salad.

So while you’re wrapping up end-of-the year projects at work or finishing final exams at school, there is evidence to support that a mind with a high cognitive load often makes poor choices. Many New Year’s resolutions involve significant willpower and commitment – like starting a diet or an exercise regime. The focus needed to achieve these goals often falls by the wayside during the holidays, and your capacity for self-control becomes feeble – resulting in a high rate of New Year’s resolution failure.

While Green America certainly supports the pursuance of a better lifestyle, we’ve come up with a resolution that doesn’t require a high level of focus or a serious time commitment. And the best part is – it will help you work towards your other resolutions while supporting the environment, communities in need, and a wide range of beneficial programs. By Taking Charge of your credit card, you can remove support for destructive mega-banks, help fund education and the arts in underserved communities, support green businesses and protect the environment, all while receiving the same benefits and rewards that you love about your conventional credit card.

By resolving to swap your old mega-bank-issued credit card for a responsible, green card, you can make a huge impact in the world. This resolution is easy to keep- you can cancel your old credit card and apply for a new one from the comfort of your own home, and you start seeing the benefits almost immediately. Even if you fail to keep any of your other resolutions, switching to a responsible credit card will create positive impacts every time you shop.

You can use your responsible credit card to achieve your other goals too. Let’s examine some common New Year’s resolutions and think about how using a green credit card could make them even better.

1. Exercise/Eat Healthy – This is the first item on everyone’s list, because it’s just so convenient to grab a pre-made sandwich when you don’t have time to make a nutritious lunch, or eat a cookie instead of an apple. A busy life leaves little time for exercise as well, and once you stop exercising, it’s hard to get yourself to start again. A green credit card can be a reminder to make smart lunch choices, as a percentage of each transaction you make is committed to financing things like community development.  You can even increase the green impact of your card by purchasing foods like organic fruits and vegetables – supporting farmers as well as communities in need.  It’s especially smart considering the alternative – that same percentage would go straight towards outlandish executive salaries if you swiped using a card issued by a mega-bank. Using your green card is just like dieting; positive inputs lead to positive results.

 2. Budgeting- Staying on top of your finances is essential. As more transactions are carried out electronically, it’s increasingly easy to lose track of how much you spend and where you spend it. A green credit card can serve as a reminder that every dollar you spend affects the world in some way. You can rest easy knowing that your transaction charges go on to fund programs that support fair trade, clean energy, and environmental protection programs rather than to fill the pockets of the mega-banks. As you track your donations to these causes, you can simultaneously keep tabs on how much you’ve spent – it’s a win-win!

3. Be More Social – After a long week, the temptation to spend Friday night at home with pajamas and Netflix is almost too much to resist. Green America urges you to go out and spend time with your friends – catch a movie, go to a community theater, or enjoy a happy hour together. And when you’re done, you can wow everybody when you bust out your green credit card to pay. You can be a trend-setter this holiday season and encourage responsible spending throughout your social circles.

 4. Travel – We all have a destination to visit somewhere on our bucket list, whether it’s a few hours away or across the globe. 2014 is the year for departure – make your arrangements, mark your calendar, and explore the world ahead of you! It’s almost impossible to book hotels, rental cars, and other travel arrangements without a credit card, and it’s best to do it with a green card.  You can find great eco-friendly trips in our Green Pages online.  With a responsible credit card, you can cover all of your expenses and remain confident that your transaction charges aren’t bankrolling things like coal-mining or palm-oil industries.   You can also use the points from your responsible credit card for airline tickets and accommodations.

 5. Help others around you- This is the most common New Year’s resolution, yet it’s undoubtedly the most difficult to achieve. Luckily, a responsible credit card is designed to help others around you! So as you purchase holiday gifts for your loved ones, or even as you rush to Starbucks to fuel your way through that end-of-the-year project, you can be sure that somewhere, someone is benefiting from your responsible credit card being swiped. Better yet, you can purchase a monthly or a one-time donation to a great nonprofit organization and give it as a gift using your green credit card. The holidays are about giving, though there is always inevitably some consumption going on. With a responsible credit card, giving and consuming are no longer mutually exclusive.

Click the Card Above to Find a List of Responsible, Green Credit Cards

Hopefully, we’ve given you some ideas to get started on achieving those nagging New Year’s resolutions. With a credit card from a responsible lending institution, you can get the products and services you need this holiday season while simultaneously supporting programs that uplift communities in need and protect our environment. You’ll remove support from profit-seeking mega-banks, and you’ll stay inspired to follow through on those other, more difficult resolutions.

For more resources on responsible credit cards, visit http://www.takechargeofyourcard.org, and share our Facebook page with your friends!

Take Charge of your Card – Switch to a Credit Card that Supports People & the Planet

Today, Green America is proud to announce our newest campaign:  The “Take Charge of your Card” campaign urges consumers to move their money away from mega-banks with questionable environmental practices, restrictive fees and interest rates, and outlandish executive compensation and into smaller community development banks and credit unions. One of the best ways to remove support from banks that fail to serve people and the planet is to reject their line of credit and start using a “green” credit card to make your purchases.

OPCBbigMega-banks collect upward of $60 billion each year on credit card transaction charges alone – just a few different institutions control a very significant piece of the credit market. By diverting the charges collected each time you swipe your credit card from a mega-bank to a bank that serves communities in need, you can be confident that your money is actually supporting something good.

And increasingly, consumers have a choice of where their transaction charges can go. Green America has compiled a list of socially responsible credit cards that direct funds to support education, green businesses, local development projects, and the environment. This means that the next time you swipe your credit card, a portion of that purchase could fund environmental protection efforts in the Amazon Rainforest, rather than going towards an extravagant executive salary. Community cards increasingly offer benefits like points that may be used for travel or merchandise, in addition to the causes they support.

Green America urges you to check out our resources on socially and environmentally responsible credit cards. You can find useful information on the pros and cons of different types of cards, a list of community development banks and credit unions offering credit cards, and resources on how to ditch your mega-bank and redirect your transaction charges to a purpose that benefits people and the planet. With your help, we can weaken the influence of large financial institutions, strengthen responsible banking, and promote a forward-thinking and green economy.

Please share our Facebook Page and let your friends know that you will no longer support the mega-banks that place strain on our environment and our economy.

 

 

Greenwashing Alert: US Mega-Banks Rank Poorly on Sustainability Indicators

Greenwashing is prevalent amongst large US banks. In “Ranking the Banks”, a recent report by the Interfaith Center on Corporate Responsibility and Sustainalytics, seven major US banks were rated on four different indicators relating to sustainability and corporate responsibility. The report ranks the financial institutions and their activities across select “social themes,” including their environmental consciousness, their tendencies to follow laws and regulations, and the way they perceived and handled investment risks. The findings of the report do not paint a pretty image of mega-banks like Citi, Morgan Stanley, Bank of America, and JP Morgan Chase; the highest score amongst the group was 60/100. Would you trust your money with an institution that got a D-?

Greenwashing,” a marketing technique that mega-banks use regularly, refers to the practice of promoting environmentally-friendly initiatives while simultaneously engaging in environmentally-damaging activities. Greenwashing is most evident through mega-banks’ investment in large-scale coal operations. While each of the banks examined has publicly stated its concerns about climate change and its commitment to a low carbon economy, a separate report by BankTrack found that since 2005, nearly $223 billion has been invested in the world’s top coal mining companies on the part of commercial banks.

Talk is Cheap, but Coal Still Fetches a High Price www.freefoto.com
Talk is Cheap, but Coal Still Fetches a High Price
http://www.freefoto.com

Banks like Chase publicly post figures and quotes about their renewable energy investment. “Climate change is an issue of growing importance to our clients and stakeholders around the world… JP Morgan’s Energy Investment Group is focused on putting capital to work in US-based renewable energy projects, including solar, wind, and geothermal,” their website touts. Despite their stated commitment, the Energy Investment Group has invested a modest $3.2 billion in renewable projects from 2003-2010. According to Banktrack.org, JPM has invested $8.15 billion in coal projects from 2005-2013 – more than double their stake in renewables. This figure is nowhere to be found on Chase’s website.

The ICCR and Sustainalytics report rated commercial banks across four key performance indicators (KPIs) drawn from socially responsible investment themes: risk management, responsible lending, executive compensation, and political contributions. Overall, the data presents a very negative picture of mega-banks. There was no apparent link between executive compensation and financial or environmental, social, and corporate governance (ESG) performance, though salaries were exorbitant across the board. The report raised considerable concerns about the systematic exclusion of environmental and climatic risks in commercial banks’ investment decisions, as well as the use of corporate treasury funds to influence regulations and policy. In short, the majority of large commercial banks are up to the opposite of what you believe they should be doing – even if they’re saying otherwise.

Laurence Loubieres of Sustainalytics warns that “Banks play a major role in the way other industries operate.” It is essential to recognize the influence the banking industry has over the economy as a whole, and to let mega-banks know that they need to begin considering the long-term dangers of activities like coal mining and buying off politicians. As a consumer, you can take an important step by cutting ties with your mega-bank. Divert your support from unsustainable commercial banks to a community development bank or a local credit union, and take the pledge to stop using your mega-bank’s credit card. You can promote responsible, sustainable investment in your community today, and send the message that short-term rewards for a few do not outweigh long-term risks for many.

Progress in the Fight against Payday Loans

Across the country, countless Americans have trouble making payments on housing, auto loans, and healthcare, as well as affording food and other basic necessities. Many people throughout the country are strapped for cash, and the payday loan industry is devouring what little savings they have left.

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Although they’re advertised almost anywhere you go, most people don’t know how payday loans work. When someone needs cash to pay a bill or cover an unforeseen expense, a lender can give them the funds they need to meet their obligations. As with most loans, borrowers will pay back the amount they received plus interest. The caveat with payday loans, however, is that the interest rates applied are absurdly high; often as much as 200-300%.

Very few borrowers seem to appreciate the gravity of an interest rate that high – and even those who do often feel they have no other recourse. By the time the payment on a loan is due, the added interest typically exceeds the balance of the borrower’s account; they now have no money in the bank, which is the reason the loan was taken out in the first place. By handing out more cash to cover the original debt plus late and overdraft fees, payday lenders continue to rope in long-term customers. These small, yet high-interest payday loans, or “deposit advances,” as big banks have come to call them, trap consumers in a perpetual cycle of debt that is nearly impossible to escape.

You can find a payday loan almost anywhere – on the internet, in strip malls, and now from your trusted banking institution. Since banks have easy access to the accounts you hold with them, they have no problem dropping you cash when you need it, and then taking it back plus interest and fees whenever they want. Across the country, citizens are falling into financial turmoil as they struggle to pay off one advance deposit loan with the next one. For many, it doesn’t seem like there is a way out.

Enter the federal government. Following the lead of at least 15 states, regulators announced a new set of guidelines last week that would apply to banks that make payday loans. The regulations limit deposit advances to once a month, and banks wouldn’t be allowed to issue a deposit advance across two consecutive months to the same borrower. The regulations also require banks to determine a customer’s ability to repay a loan by reviewing at least 6 months of banking activity.

A study by the Consumer Financial Protection Bureau (CFPB) states that more than 50% of borrowers took out loans of $3,000 per year or more, and were in debt about 40% of the time. Of these 50%, more than 50% took out another loan within just twelve days of the first. On average, borrowers took out 10 loans each year and paid $458 in fees.

The new guidelines will apply to banks regulated by the Comptroller of the Currency and the Federal Deposit Insurance Corporation. Of the six big banks that currently offer deposit advances, Wells Fargo, Guaranty Bank, US Bancorp, and Bank of Oklahoma are subject to the rules limiting the frequency of loan issuance. Banks Fifth Third and Regions, which are regulated by the Federal Reserve, are not subject to the new rules, though they could see pressure from the CFPB to address these issues in the near future.

Payday loans are facing scrutiny from the law outside of banks as well. One of the nation’s largest lenders, Cash America, just paid a $19 million settlement to the CFPB for robo-signing documents and charging members of the military and their families up to 36% interest on loans, in violation of the Military Lending Act. While there are certainly many instances where a small, immediate cash loan can help someone out of a pinch, it’s clear that profit-making is the top priority of these lending institutions, and they are willing to break laws and place financial strain on everyday Americans to achieve that goal.

Aside from educating yourself of the dangers payday loans may pose to your account balance, Green America urges you to take it a step further. By Taking Charge of your Credit Card, you can remove support from the big banks that use deposit advances to prey on struggling Americans. You can shift your support to a community development bank or a local credit union, which have the dual benefits of offering trustworthy financial products AND supporting projects that benefit your community directly. Click Here and let the big banks know that you don’t approve of their predatory lending techniques today.

An Unfinished Mission – Senator Warren Fights for Financial Reform

An Unfinished Mission:

On Tuesday, November 12, 2013, a group of financial experts gathered in the Russell Senate Office Building in Washington, DC to discuss the current state of financial industry regulatory reform, with a keynote speech by Senator Elizabeth Warren (D-MA). Speakers exhibited a sense of self-awareness that has been largely missing from the conversation on financial rulemaking; panelists humbly acknowledged that there are still significant challenges to achieving regulations that actually protect consumers while earning support from the financial industry.

Elizabeth Warren Web
Photo: http://www.elizabethwarren.com

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which authorized several federal agencies to write financial regulations addressing a vast array of issues.  Agencies are still in the process of implementing those regulations, and they face opposition from the industry daily. Testimonies from professors, economists, financial regulators, and even former members of Congress discussed the problems the financial sector faces today, the challenges to implementing the most significant financial reform act since the 30’s, and the issues that remain unresolved.

Panelists sipped coffee and nibbled at pastries as they waited their turn to discuss the forces that drove our national economy to the brink of collapse in the fall of 2008. After a brief discussion of derivatives, a device that allows speculators to hedge risks against other assets, panelist Marcus Stanley of Americans for Financial Reform, of which Green America is a member, raised the issue of “Shadow Banking.” The term refers to transactions that are not based upon the acceptance of traditional bank deposits, and therefore not subject to traditional banking rules and regulations. Jennifer Taub, a professor at Vermont Law School, made the case that since the 1980’s, the United States’ securities rules were gutted based on the premise that “sophisticated investors,” who completed complex transactions, better understood the incentives and risks involved than regulators, and thus were actually inhibited by laws requiring disclosure on the transactions.

The problem of shadow banking was further illuminated when Mike Calhoun of the Center for Responsible Lending discussed how subprime mortgages originated. The proliferation of mortgages sold to subprime borrowers, Calhoun and others on the panel asserted, was a result of ludicrous monetary incentives offered to lenders, paired with an acute inability to enforce regulation upon those responsible for the reckless lending.

The failure to craft and implement regulations in the financial sector directly led to the events that shocked the economy in 2008. As money passed between institutions with little to no accountability for fraud and deceit, banks swelled to the point where they were famously “too big to fail.” As they became too big to fail, they became too big to manage. It became difficult to determine the level of capital banks held at any given time, and thus difficult to impose a minimum capital requirement so that banks could sustain their operating losses. To make many long stories into a short one, banks pushed their limits as far as they possibly could before things began to fall apart. Of course, when things fell apart, tax payers were forced to come to the rescue to bail out the banks. Americans paid a steep price as trillions of dollars in wealth evaporated and the unemployment rate shot up.

So five years after the massive bailout given to failing banks, the fate of financial regulation reform remains up in the air. At the same time, megabanks — such as Citi, Bank of America, Wells Fargo, and Chase — are even bigger.  If they fail again, the bailout will dwarf the last one. Lawmakers and policy specialists alike are grappling with defining banking’s role in America’s future. Should we continue to allow banks to participate in markets other than banking? Or should we, despite the defiant cries of financial executives, decide as a country to make financial institutions work more for the people, and less for themselves?

Senator Warren is a leader on the Hill of financial regulatory reform, and she believes the costs imposed to society as a result of lax banking rules are unacceptable and reprehensible. Warren cited bailouts and other taxpayer subsidies as the screws holding the “too-big-to-fail” institutions together. “We don’t grow this country from the financial sector,” she asserted, “but from the middle class.”

As citizens, we can urge lawmakers to support the successful implementation of the Dodd-Frank Act regulations (and urge Congress to go further). At the same time,  Green America urges you to Take Charge of your Credit Card and shift your support from the megabanks back into your own community. Your money belongs to you, and you should think twice before wasting it on credit card fees and propping up the investments of megabanks that don’t benefit anyone but those at the top of the food chain. Let us know what you think by taking our pledge to stop supporting banks that are too big to do anyone any good!

What Do Your Credit Card Charges Support?

Cash or credit? In 2012, purchase volume in the United States from credit card companies Visa, MasterCard, American Express, and Discover totaled close to $2.1 trillion. Of these $2.1 trillion worth of transactions, cardholders’ issuing banks collect 1-3% in the form of an interchange fee. While 1-3% of the cost of a sandwich at Subway for lunch may seem negligible to you, consider all of the other people in the same restaurant using their credit cards, multiplied by the number of locations across the country, multiplied by the number of lunches each person purchases each year, and so on. If we crunch the numbers, we can deduce that credit-issuing megabanks collect between $20.5 billion and $61.4 billion each year on credit card transactions.

The majority of that money goes to the 10 largest credit card issuing banks in the U.S. It’s difficult to believe that just a few institutions get to divvy up such large sums of money amongst themselves, especially when the individual charges to an everyday person’s credit card go largely unnoticed. As you might guess, those billions of dollars pay for high salaries and bonuses, and finance lending to fossil fuel polluters and other destructive industries around the globe.

Let’s think for a minute about just how much money large banks amass from the collective totals of millions of miniscule charges, and how that money could be used to fund projects that could add real benefit to our society – the kinds of projects that community development banks and credit unions finance every day. Consider one of our largest expenditures as a nation – energy. According to EnergyStar.gov, the average cost of retrofitting a residential home in New York State with efficiency upgrades to generate proven energy savings falls between $5,600 and $8,500. Assuming the credit card industry has a bad year and only generates $20.5 billion on interchange fees, and that 100% of the retrofits will cost $8,500, the money scooped up by megabanks could instead fund roughly 2,470,600 energy efficiency installation projects in New York homes.

Alternatively, the price of installing a new wind turbine in the US is roughly $4 million on the high end. A new wind turbine generally provides 2 megawatts of power-generating capability. Once again let us assume that interchange fee revenue is at the low end of $21 billion. At that amount, about 5,250 new turbines, or 10,500 megawatts of electric capacity could be financed, instead of covering credit card promotion, executive compensation costs, and other dubious expenditures. If credit-lending megabanks had a good year and collected $61 billion, that’s about 15,250 new turbines, or 30,500 megawatts (30.5 gigawatts) worth of clean, renewable electric potential shifted primarily into the pockets of bank executives, and away from the collective benefit of our environment and our economy. To further illustrate, the United States’ current wind capacity is about 60,000 megawatts, or 60 gigawatts. In one good year for the credit-issuing industry, revenue from interchange fees alone could increase the current national wind power capacity by 50%, yet we continue to pay high near-and-long-term costs for dirty, non-renewable sources of electricity.

The choice is ours to make.  We can continue to support megabanks.  Or, we can sign up for credit cards issued by community investment banks and credit unions that support programs like clean energy development, organic farming, and low-income housing. Instead of supporting the 1%, you can direct your interchange fees straight back into your community! Join our Take Charge of your Credit Card campaign and say goodbye to megabanks. Apply for a responsible credit card today, and take our pledge to let us know that you are breaking up with your megabank.

This post was researched and written by Sam Catherman, Green America’s Responsible Banking Intern.