Credit Card Update April 1
DELAY ON DEBIT CARD FEE CAP GAINS MOMENTUM
A legislative effort to delay and study a new law capping the swipe fees that retailers pay is picking up steam in Congress. Senator Jon Tester filed an amendment to a small business bill to pause a new law that helps retailers, small and large, by capping fees paid to the largest banks and credit card companies to process debit. Tester, a Montana Democrat, is seeking a one-year reprieve from new swipe fee caps, as well as a study. A recent move by the Federal Reserve could add fuel to those seeking a delay. Chairman Ben Bernanke wrote Congress on Tuesday saying that the Fed had been inundated with correspondence about implementing new caps and won’t be able to release proposed new rules by its April 21 deadline. Bernanke did say the Fed can enact the new rules by a July 21 deadline.
Story by Jennifer Liberto for CNNMoney
GOOGLE PURSUES ROLE IN MOBILE PAYMENT
Google Inc. is teaming up with MasterCard Inc. and Citigroup Inc. to embed technology in Android mobile devices that would allow consumers to make purchases by waving their smartphones in front of a small reader at the checkout counter, according to people familiar with the matter. The Internet giant is aiming to make mobile payments easier in a bid to boost its advertising business. The planned payment system would allow Google to offer
retailers more data about their customers and help them target ads and discount offers to mobile-device users near their stores. Google isn’t expected to get a cut of the transaction fees. The project, which is in its early stages, would allow holders of Citigroup-issued debit and credit cards to pay for purchases by activating a mobile-payment application developed for one current model and many coming models of Android phones. The idea is to turn the phones into a kind of electronic wallet. “A phone is a lot smarter than a card,” said Doug Bergeron, VeriFone’s chief executive, in an interview. “It opens the door to a rich experience at the point of sale that retailers really covet.”
Story by Amir Efrati and Robin Sidel at Wall Street Journal
HARSH CONSEQUENCES OF ONE LATE PAYMENT
Life gets busy. Every so often, a bill can get overlooked or paid late. It can happen regardless of your credit score or income level. But if you miss a credit card payment, there can be a big price to pay. It does not matter what your credit history is or how long you have made on-time payments. If you miss making one minimum payment by the due date, you will likely get a notice that your issuer will charge a higher interest rate on future purchases. This can be accompanied by a late fee and lost reward points. A missed payment is an expensive mistake.
WHEN A DONATION IS DINGED
Our growing love affair with credit cards, especially rewards cards, carries a real cost for our charities, which wind up footing the bill for our card fees. Credit card transaction fees are higher-2.5% to 3% per transaction, on average-with rewards cards typically carrying higher charges than other cards. The fees apply whenever you use a credit card, whether you donate
over the phone, in person or online. Online donations grew 40% last year, according to Convio, a provider of software to nonprofits, though they still make up only about 10% of overall giving. Retailers can adjust their prices to cover fee expenses. That isn’t an option for charities, religious groups and other nonprofits, which usually can’t pass along the fees because of rigid credit-card rules.
Story by Karen Blumenthal for the Wall Street Journal
AMEX PUSHING EXPANSION CHALLENGES VISA, PAYPAL WITH EWALLETS
American Express, the world’s biggest credit card issuer by purchases, has created an online- and mobile-payments application that will compete with Visa and PayPal. Serve, as it’s called, is a prepaid electronic wallet that can be funded by linking with a checking account, debit card or credit card, said Dan Schulman, group president of enterprise growth at New York-based AmEx. Starting today, Serve customers may send money to each other with their smartphones, shop online and receive plastic cards for use at bricks-and-mortar retailers that accept American Express. Consumers can open accounts at serve.com and download an application to their Apple iPhones and iPads, or smartphones using the Android operating system, Schulman said. Users of Research In Motion’s BlackBerry will have access later this year, he said. There’s no initial cost for opening an account, a minimum balance isn’t required and deposited funds don’t expire. The Serve card is labeled as a “prepaid” product, which means it’s exempt from caps on debit-card transaction fees mandated by the Dodd-Frank law that overhauled the financial industry.
Story by Margaret Collins for Bloomberg
ANOTHER BANK CUTS DEBIT CARDS REWARDS PROGRAM
Wells Fargo is no longer making their debit card rewards program available to new customers. The bank announced last week the program ended for new customers at the former Wachovia branches on March 27 and would be terminated at the Wells Fargo branches on April 15. The bank did not announce any changes to the program for existing customers. This continues the trend taking place with rewards programs at some of the nation’s leading banks. Chase closed enrollment in their debit rewards program in early February and will cut the program to existing customers in mid-July. In September, PNC Bank will no longer give reward points for debit card purchases to customers with free checking accounts.
AMERICANS PUT CREDIT CARD BILL AHEAD OF MORTGAGE
Americans are more likely to pay their credit card bills than their mortgages, according to a study from TransUnion LLC. The trend, which began during the Great Recession, reflects the lingering affects of the housing crisis. Many experts expected the payment behavior to revert by now to the old dynamic of consumers paying their mortgages first, but that has yet to happen, the Chicago-based credit score agency said. In the fourth quarter of 2010, the most recent quarter in the study, 7.24 percent of consumers paid their credit cards but not their mortgages compared to 3.03 percent who were delinquent on their credit card bills but current their mortgages. One bright spot: The percentage of consumers paying their credit card bills before their mortgages fell slightly in the most recent quarter from its peak of 7.4 percent in the third quarter, a sign that the financial pressures on consumers could be starting to ease.
Story by Sandra Jones for the Chicago Tribune