Debit Cards overtake cash as the most popular payment type, according to Fed diarists



The growing popularity of debit cards and the displacement of cash by card and electronic payment alternatives is nothing new, but a Federal Reserve banks’ report released Thursday shows debit cards for the first time have surpassed cash as the most-used payment type.

The findings come from the 2018 Diary of Consumer Payment Choice, the fifth in an annual survey overseen by the Federal Reserve banks of Atlanta, Boston, Richmond, Va., and San Francisco. The research draws on a nationally representative panel of consumers who record all their purchase and bill-pay transactions and amounts over several days. The year’s group included 2,873 participants who recorded transactions for at least four days in October.

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Sweden is close to being the first country in the world to eliminate cash

sweden cash-free

It could take up to the year 2030 for physical money to disappear from Sweden’s system altogether.

Four out of five purchases in Sweden are paid for electronically or by card according to a new report from the Swedish news organization, The Local. They also report that Swedes are using electronic payments 260 times per person, per year.



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Lenders Delaying Evictions, Borrowers Living Rent-Free

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Patricia and Eugene Harrison have lived since October 2008
without making any payments on their mortgage

Despite being months behind, many strapped residents are hanging on to their homes, essentially living rent-free. Pressure on banks to modify loans and a glut of inventory are driving the trend.
It’s been 16 months since Eugene and Patricia Harrison last paid the mortgage on their Perris home. Eleven months since the notice got slapped on their front door, warning that it would be sold at auction.
A terse letter from a lawyer came eight months ago, telling them that their lender now owned the house. Three months later, the bank told them to pay up or get out by the end of the week.
Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. They’re not planning on going anywhere.
“We’re kind of on pins and needles, but who’d want to leave when you put this kind of energy into a house?” said Eugene Harrison, 70, gesturing toward a bucolic mural of mountains, stream and flowers the couple painted on the living room wall.
Throughout the country, people continue to default on their home loans — but lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free.
Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes.
And with a glut of inventory in places like Southern California’s Inland Empire, Nevada and Arizona, lenders are loath to depress housing prices further by dumping more properties into a weak market.
Finally, allowing borrowers to stay in their homes helps protect the bank’s investment as it negotiates with the homeowners, said Gary Kirshner, a spokesman for Chase bank, a major lender.
“If the person’s in the property, there’s less chance for vandalism, and they’re probably maintaining the house,” he said.
Economists say the situation won’t last forever, but in the meantime the “amnesty” may allow at least some homeowners to regain their financial footing and avoid eviction.
In the Inland Empire, an estimated 100,000 homeowners are living rent-free, according to economist John Husing, who based that number on the difference between loan delinquencies and foreclosures. Industry experts say it’s difficult to say how many families are in that situation nationally because only banks know for sure how many customers have stopped paying entirely.
But Rick Sharga of Irvine data tracker RealtyTrac notes that the number of loans in which the borrower hasn’t made a payment in 90 days or more but is not in foreclosure is at 5.1% nationally, a record high. And yet the number of foreclosures last year was 2.9 million, below the 3.2 million that RealtyTrac economists predicted.
More evidence is provided by another firm, ForeclosureRadar, which says it now takes an average of 229 days for a bank to foreclose on a home in California after sending a notice of default, up from 146 days in August 2008.
“For some reason, banks are being more lenient with homeowners who are behind on their loans,” Sharga said. “Whether it’s a strategy to try and slow down the volume of foreclosures or simply a matter of the banks being able to keep up with volume is something that banks only know for sure.”
Lenders say the trend reflects their efforts to work with borrowers to modify loans to avoid foreclosure. Bank of America “continues to exhaust every possible option to qualify customers for modification or other solutions,” spokeswoman Jumana Bauwens said.
Some lenders are making it a policy to partner with delinquent borrowers. Citibank said this month that it would let borrowers on the brink of foreclosure stay at their homes for six months, whether or not they make payments, if they turn over their property deed.
Such policies may partly reflect the fact that lenders can’t keep up with all the foreclosures, some say.
“The mortgage lenders are so backlogged that some people are able to slip through the cracks,” said Kathryn Davis, a real estate agent at America’s Real Estate Advocates in Corona.
That was apparently the case for the Harrisons, who were told at various times that their house had been sold, that it belonged to someone else and that it was empty.
“It’s been frustrating, a real major pain in the buttocks,” said Eugene Harrison, a nondenominational minister with a clipped mustache and a sudden laugh.

The Harrisons missed their first payment in October 2008, shortly after Patricia Harrison, 57, lost her job as a healthcare aide and her husband’s part-time towing work dried up. They said they applied for a loan modification with Countrywide Financial (since acquired by Bank of America) but were told that they couldn’t receive one until they were three months behind on their payments. So they stopped paying.
In April 2009, they received a notice warning them that their property “may be sold at a public sale,” and in July, they were told their house was a bank-owned property.
he bank sent a notice by FedEx in October demanding $3,000, and when the Harrisons called to discuss this notice, they were told they had four days to vacate the house.
Panicked, they arranged to stay with family in New Mexico and started packing their things, filling their garage with boxes of books, camping equipment and art. But no one came to kick them out.
“We were afraid to leave the house, afraid the sheriff was going to come,” said Patricia Harrison, an amateur painter.
After contacting consumer advocates about their situation, the Harrisons decided to stay put. Soon after, two men in a white pickup truck showed up at the house and peeped in the windows, telling the Harrisons that they thought the house was abandoned.
The Harrisons suspected they were planning to move in themselves and chased them away.
The couple don’t want to leave but are in the midst of a running dispute with Bank of America about the terms of their loan modification. The bank says it mailed them documents this month.
As they wade through the red tape, the Harrisons can’t imagine abandoning a house where they’ve left their mark in the goldenrod and potpourri rose walls, the new fixtures and stenciling in the bathrooms, the fruit trees planted in the yard.
Although the Harrisons’ future is uncertain, industry observers agree that the rent-free life can’t last forever. As home values climb, banks will find it financially advantageous to foreclose on delinquent borrowers and sell their properties.
“In many cases, particularly in California, people owe a boatload of payments, and no bank is going to forgive that,” said Guy Cecala, editor of Inside Mortgage Finance, a trade publication.
In Diamond Bar, the Fraguere family is finally moving on after living rent-free for 18 months. Job loss and other setbacks prevented them from paying their mortgage, but they say they didn’t hear anything from the bank, First Franklin, until a real estate agent showed up at their door last month saying she was going to sell their house.
Sandy Fraguere wasn’t surprised that it had taken the bank so long to ask them to move.
“I don’t think they really knew what was going on or who was there,” she said.
Next stop for the Fragueres is a hotel, where they plan to stay for two weeks until their apartment in Chino Hills is ready for them to move in. Their dogs are being boarded and their belongings stored until they can retrieve them someday. Their children, ages 8 and 9, are being steeled for more instability.
The Fragueres have started saying goodbye to their neighbors, adding yet another empty house to a block that has already seen two other families forced to pack up and leave.

Despite being months behind, many strapped residents are hanging on to their homes, essentially living rent-free. Pressure on banks to modify loans and a glut of inventory are driving the trend.

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The Growing Threat of “Money Mules”

money mule chart

Don’t you think a lot more people need to be aware of this?

Kevin Poulsen at Threat Level has a great item up about the growing menace of “money mules.” The term refers to bank customers who’ve been conned into unwittingly laundering cash that hackers have stolen from business bank accounts. The con and the funny phrase have been around for a while, but the US Federal Deposit Insurance Corporation issued a new warning to American financial institutions about the increasing spread on Thursday. Snip:

Using specialized Trojan horse malware, cybercrooks have been intercepting web-banking credentials from the computers of small and midsize businesses, and then initiating wire transfers to mules around the country. The mules are consumers who’ve been lured into fake work-at-home scams, in which their employment involves receiving money transfers and then forwarding the funds to Eastern Europe, either directly or through other mules.

The scheme has exploded in the last year…

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China: Hot Money Influx Raises Concerns

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Hot money going out, even hotter coming back in

In September 2008, China witnessed a massive exodus of hot money due to the global financial crisis. However, with the Chinese economy showing signs of improvement in the second quarter of 2009, the situation reversed with a rush of hot money returning to China.
In late June 2009, China’s foreign reserves increased sharply to $2.13 trillion, making China the world’s largest foreign reserve holder with its foreign reserves accounting for about 30 percent of the world’s total.
Since then, China has maintained foreign reserves larger than the combined total of those ranking No 2, 3, 4 and 5 – i.e., Japan, Russia, Taiwan and India.
China’s foreign reserves jumped by $177.87 billion in the second quarter of this year, up 2,200 percent in terms of the amount of growth compared to the previous quarter’s $7.71 billion growth.
Given China’s strict control on capital accounts, the change in foreign reserves, in general, was caused mainly by the change in trade surplus or foreign direct investments (FDI).
However, the recent sharp increase in China’s foreign reserves was attributed to the increase in speculative funds rather than an increase in trade surplus or FDI.
The investments by both QFII (qualified foreign institutional investors) and QDII (qualified domestic institutional investors) are subject to strict government screening. Considering that QFII and QDII investments each stood at below $50 billion this year, the impact of these financial investments on China’s foreign reserves was insignificant.
China’s trade surplus and FDI totaled $38.79 billion in April-May 2009, which represented only 28.6 percent of the $135.75 billion growth in the nation’s foreign reserves during the period. The influx of hot money into China is estimated at $30 billion to $40 billion in the first half of this year.
External factors behind the return of hot money include the financial easing policies taken by major countries. Along with the collapse of market trust resulting from the financial crisis, large financial institutions increased the amount of cash they held while dumping such financial assets as bonds, causing a slowdown in currency circulation in the global financial system.
Western countries cut interest rates to get the economy back to normal. As a result, they secured financial liquidity, leading to a sharp increase in the reserve base.
As the global financial system shows signs of stabilization, a massive amount of “low cost” funds are being transformed into hot money and injected into the rapidly recovering emerging markets.
China’s capital market regaining vigor, thanks to its economic recovery, is yet another factor behind the influx of hot money.
The stable recovery of the real economy and the revival of the financial market also contributed to bringing hot money back to China.
Unlike the influx of hot money in 2006 and 2007, when market expectations for a possible appreciation of the renminbi played a key role, today’s inflow of hot money does not seem to have any close relationship with expectations of a yuan appreciation, which is expected to remain unchanged unless exports improve further.
Given that China’s exports in the first half declined by 21.8 percent from the previous year, the possibility is low that the yuan will appreciate.
The influx of hot money contributed to the expansion of credit loans and the rebounding of asset value. However, it remains to be seen how long its effect will last.
The return of hot money generated a favorable anti-deflation effect by facilitating the expansion of credit loans and the resurgence of asset value.
If the influx of hot money continues even after the economy stabilizes in the third quarter of 2009, the inflationary pressure could escalate due to an excessive expansion of credit loans and a bubble in asset value.
The impact of hot money up until now is estimated to be at a negligible level. Considering the scale of capital outflow since September 2008, the current level of hot money in China is similar to the level of early 2008.
Given that China runs a strict financial management system, chances that a massive movement of hot money will incur a financial crisis in Asia is slim.
Other factors include the fact that the current influx and outflow of hot money remains within a controllable range and China maintains an appropriate level of foreign reserves.
The influx of hot money is expected to generate a temporary and limited influence on China’s credit loans and capital market.
The return of hot money has contributed to the expansion of credit loans and the rebound in asset values, thereby exerting a favorable influence on the Chinese economy. The inflow of hot money is expected to continue in the second half of 2009.
To offset a decline in exports, the Chinese government will likely acquiesce and allow the influx of a certain level of hot money. However, if the influx of hot money expands too much, the government may strengthen its control to secure financial stability.

In September 2008, China witnessed a massive exodus of hot money due to the global financial crisis. However, with the Chinese economy showing signs of improvement in the second quarter of 2009, the situation reversed with a rush of hot money returning to China.

Continue reading… “China: Hot Money Influx Raises Concerns”


Ten Rules for Bootstrapping Your Business

Ten Rules for Bootstrapping Your Business

When the going gets tough, the tough go bootstrapping

Walk a Mile in These Bootstrapped Shoes.

Much the way nature has evolved, the world of business operates in fluid balance with money serving as its breathable oxygen. And in much the same manner as nature, businesses feed off the less fortunate, using their superior strength to suffocate and feed off of the revenue streams of their daily prey, walking casually away to find their next meal.

Welcome to the startup business playground, where some of the best and brightest talent in this country has been burned at the stake. 

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