Credit Card News
American Express Buys Revolution Money, Secure Credit Card Payment Platform
Posted on - November 19, 2009American Express made a large bet on the future of payment processing with its purchase of Revolution Money. American Express Chairman and CEO Kenneth Chenault told reporters that the acquisition allows both companies to grow beyond their current strengths. "New payments products and platforms are evolving rapidly and it's important for us to keep identifying cutting edge technologies that can extend our leadership beyond the traditional payments arena," said Chenault.Revolution Money, launched by former AOL and MBNA executives, has attracted customers who demand higher security credit card options. The RevolutionCard carries no personally identifiable customer information and requires a four digit PIN for transactions, much like secure credit card products that have become popular in Europe. Meanwhile, the company's proprietary payment processing platform has attracted merchants who prefer less expensive interchange fees. Because American Express charges transaction fees higher than the industry average, credit card analysts see the acquisition as an opportunity for American Express to offer a lower-cost, higher security payment option for frugal merchants. Likewise, RevolutionCard offerings backed by American Express can reach wider audiences, compelling more merchants to accept the card. Read More
Credit Card Default and Delinquency Rates Send Mixed Signals
Posted on - November 18, 2009Conflicting metrics have some credit card industry analysts scratching their heads as lenders anticipate an unusual holiday season. On one hand, most major credit card issuers have reported drops in the number of account defaults during the month of October. However, an increase in the number of delinquent accounts could either mean that cardholders are hoarding cash in advance of holiday spending, or that banks may have to brace themselves for another wave of write-offs.Capital One, American Express, Chase Credit Cards, Bank of America, and Citibank all reported better than expected declines in the amount of charge-offs during October. Company officials told shareholders and reporters that many of their customers used tax refunds, company bonuses, and other lump sum payments to pull their accounts back from the brink of cancellation. Only American Express reported a similar drop in the number of accounts in delinquent status, signaling that many American credit card users still struggle with making monthly minimum payments. Read More
Deceptive Credit Card Applications Targeted by Law Enforcement
Posted on - November 16, 2009Credit card applications have become so scarce in Americans' mailboxes that just about any kind of "pre-approved" offer can get consumers' attention. Law enforcement officials in Oregon and in the District of Columbia recently cracked down on a firm that promised access to easy credit in exchange for hefty processing fees. Investigators charged the company with fraud after consumers complained about "bait and switch" tactics designed to appeal to subprime borrowers. Instead of a credit card, applicants discovered they had entered a contract with a private catalog company that failed to report account information to major credit bureaus. Representatives from the Federal Trade Commission reminded consumers to watch out for unsolicited credit card offers that seem too good to be true, especially during an economy when most legitimate lenders have scaled back pre-approved application promotions. Many banks offer secured credit card programs and other "second chance" lending products with deposit requirements smaller than the $395 in fees charged by the company under investigation. Read More
Credit Card Acceptance Boosts Cab Revenue in NYC
Posted on - November 13, 2009Despite recent concerns from convenience store clerks and other retailers about the rising cost of accepting credit cards, a new group of merchants reports major success with a move from cash to plastic. New York City cab drivers, in a recent New York Times Magazine profile, revealed that credit card acceptance in taxis can boost revenues by as much as 13 percent. Credit card holders tip more generously, too, with survey results showing a 22 percent average increase on gratuities compared with cash-paying riders.Critics of high interchange fees claim that the Times' numbers have been skewed by former riders of private car services who have switched to less expensive cab rides during a tight economy. Merchant acceptance proponents counter that claim with the suggestion that many of those previous sedan riders switched to cabs specifically because they can use corporate credit cards to pay fares that might not have been reimbursed if paid with cash. All sides agree that more American consumers expect access to credit card terminals in cabs, corner stores, and other venues once dominated by "cash only" signs. Read More
Small Business Credit Card Issuer Advanta Prepares for Bankruptcy
Posted on - November 12, 2009Small business credit card issuer Advanta filed for bankruptcy this month, as default rates among its former cardholders soared above the fifty percent mark. At its peak, the Philadelphia-based lender was rated among the top twenty credit card issuers by volume. However, the impact of a soft economy forced many entrepreneurs and business owners to miss minimum payments or seek their own protection from paying debt.In bankruptcy documents filed with court officials in Delaware, Advanta listed $331 million of debts against $363 million in assets. Despite an apparent surplus, Advanta's portfolio still contains small business credit card accounts with highly volatile repayment rates. Statements made to journalists earlier in the year indicate that as many as six out of ten Advanta credit card customers failed to maintain consistent payment schedules. With independent industry write-off averages hovering at about ten percent, a portfolio with a default rate five times as high may not attract much attention at auction. Having already cut off new charges to customers, the lender appears to have suffered the wrath of angry business owners who see little incentive to paying their Advanta bills. Read More
Federal Reserve Study Shows Banks Tightening Credit Card Approvals, Increasing Rates and Fees
Posted on - November 11, 2009The Federal Reserve issued a statement this month that essentially agrees with the findings of private studies and journalists about the state of the credit card industry. Releasing results from its quarterly survey of banks to journalists, the Federal Reserve noted that more banks rely on fees and finance charges from cardholders in good standing to offset losses from defaulted accounts.Therefore, according to the Fed's survey results, many banks intend to increase annual fees, raise interest rates, and pursue more service charges on most credit card accounts. Some survey respondents told researchers that some of their companies' actions were prompted by pending credit card regulations. However, most bank officials responding to the Fed's request noted that credit card account changes were mostly designed to insulate lenders from the effects of a sour global economy.Roughly one in four banks responding to the Fed's survey reported tightening their credit card approval standards in the past quarter. While that figure may sound high to casual observers, industry analysts note that a similar survey conducted in the summer of 2008 resulted in a 75% affirmative response to the same question. Lending industry observers note that this trend represents a more prudent approach to offering credit cards and setting credit limits, compared to the loose market of only a few years ago. Read More
Convenience Store Owners Protest Credit Card Fees
Posted on - November 10, 2009Capitol Hill played host to an unusual group of protesters this fall, according to a recent report in U.S. News and World Report. Thousands of 7-Eleven convenience store franchisees and their staff members rallied in Washington to support proposed legislation that would change the structure of interchange fees on electronic payment platforms.Typically, merchant banks charge companies two kinds of interchange fees for the privilege of accepting credit cards: a flat fee for processing, plus a percentage of the total transaction amount. At most retailers, these fees add up to between two and three percent of a retail purchase, a figure that can often be passed along to consumers through slightly higher pricing.The flat-rate portion of an interchange fee often costs more than a candy bar or a pack of gum. With Americans making smaller purchases on debit and credit cards, some small retailers have asked for government intervention. Lawmakers have already proposed a restructuring of credit card processing fees that could significantly lower prices for retailers, at the expense of frequent flyer and cash back reward programs for high-volume purchasers. Read More
Credit Card Direct Mail Offers Drop by Over Two-Thirds
Posted on - November 9, 2009Online credit card offers provide far better deals than today's crop of direct mail pitches, according to a new market research study. Business intelligence experts and Mintel Comperemedia reviewed the contents and the quantity of credit card direct mail marketing campaigns over the past year. The researchers discovered a 71% drop in the number of new credit card offers mailed to American consumers, coupled with balance transfer deals requiring fees as high as 5%.Andrew Davidson, spokesperson for Mintel Comperemedia, told reporters that uncertainty about new banking regulations and long lead times for direct mail campaigns forced many lenders to refocus credit card marketing on web-based offers. "In addition to adjusting their direct marketing strategy by sending less mail, they're raising rates and fees on existing and new cards," Davidson said. "The credit card offers we see today are undeniably less attractive than they were one year or even six months ago."According to industry analysts, credit card marketers have shifted focus away from broad outreach and new customer acquisition strategies. Instead, many banks have restructured credit card agreements to generate higher finance charges and more profitable service fees. Read More
