Credit Card Update February 4
VISA POSTS 16% RISE IN PROFIT
Visa’s quarterly profit rose 16 percent in its most recent quarter as debit card use continued to grow and consumers returned to using credit cards. Credit card use in the United States, which dropped off during the recession, rose 7.5 percent. Debit card use jumped 16 percent. International credit card use rose 20 percent. Global debit card use, a much smaller business, rose 34 percent.
WHILE THE RICH SPLURGE, THE REST HOLD BACK
Wealthy shoppers are bolstering the recovery–and masking the reluctance of many less affluent Americans to join in. Sales are up at Tiffany and Coach, thanks to demand for $6,000 diamond pendants and $1,200 leather handbags as a stock market surge pads the wallets of the rich. At the other end of the economic spectrum, Wal-Mart Stores, the world’s largest discount retailer, reports that many of its customers are still living paycheck to paycheck as they await an improvement in job prospects. That means they stick with the essentials. Purchases made in the third quarter with American Express credit cards, carried by relatively wealthy and corporate customers, were back to the most recent peak for a third quarter, which was reached in 2008.The combined total for Visa and MasterCard didn’t experience a similar rebound, according to company data.
Story by By Shobhana Chandra and Anthony Feld for Bloomberg Businessweek
FED REPORTS BANKS MORE UPBEAT ON DELINQUENCIES AND CHARGE-OFFS
The Federal Reserve released the quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices for January 2011. The Fed reports that “moderate to large fractions of banks reported they expected improvement in delinquencies and charge-off rates during 2011 in every major loan
category.” Large banks also appear to be more upbeat than other banks when it comes to credit card practices. Large banks are more likely to have reduced the required minimum credit score and the standards for approving applications.
TOUGH CREDIT CARD RULES MAY HIT STAY-AT-HOME MOMS
The Federal Reserve has proposed rules that could prevent stay-at-home spouses without their own income from getting a credit card. Current rules allow issuers to consider an applicant’s household income, but the proposal
would force issuers to focus on each person’s income source. The rules would come into play before opening a new account or increasing the credit limit on an existing account. “We are concerned that the board’s proposal will hamper a stay-at-home mom’s ability to establish her own independent credit history by applying independently for a card,” according to a letter from Democratic Reps. Carolyn Maloney and Louise Slaughter, both of New York.
Consumers without independent income or assets could apply jointly for a
card with a spouse or other household member. Or an account holder could make a spouse an authorized user of their account. The Fed’s final rules are expected in coming months. The public comment period for the proposals closed in January.
Story by Ruth Mantell for MarketWatch
TAKE ADVANTAGE OF RELATIVELY UNKNOWN CREDIT CARD PERKS
Cash rebates and reward points receive most of the bold print and attention, but there are some nice perks that you could be missing from your credit card. These benefits can save money on tickets, shopping and travel, guarantee the lowest price on purchases, and provide an extended warranty. But you can’t take advantage of these perks if you don’t know about them. Here are five perks to your credit card you may not be using…
AMERICAN EXPRESS CEO’S $7.6 MILLION SALE
While American Express slowly works to get back to the top of the luxury plastic heap, one top insider has charged ahead in a different way: by cashing in. On January 27, Chairman and Chief Executive Kenneth Chenault sold 170,000 American Express shares for $7.6 million, an average of $44.56 each. He continues to own 906,703 shares, 798,894 of which he owns directly, 85,220 of which he owns indirectly through his wife, and 22,589 of which he owns indirectly by a 401k plan. The grand total of Chenault’s holdings represents less than 1% of the company’s outstanding shares.
Story by Grace Williams for Barron’s
WILL THAT BE CASH, CREDIT CARD, OR APP?
For all that high-tech convenience, people using their cellphones as an
alternative to credit cards may be giving up some basic protections and risking financial damage. There are several pitfalls. If you set your account to log in automatically, anyone with your phone can make purchases. Amazon and PayPal say none of your account information is stored on the phone, and accounts are password protected. But Troy Bernard, the director of chip payment technology for Discover, acknowledges that a lost handset could result in unauthorized spending. The risks are the same as carrying a credit card. Losing either opens the door to unauthorized charges. And federal laws and bank regulations covering credit- and debit-card transactions won’t apply.