Credit Card Update October 14
LAWMAKERS SEEK PROBE ON BANKS’ NEW DEBIT CARD FEES
Members of Congress are asking the Justice Department to investigate whether
Bank of America and other major banks improperly worked together to charge
customers new monthly fees for using their debit cards. Rep. Peter Welch,
D-Vt., and four other Democrats said Thursday that they’ve asked Attorney
General Eric Holder to open a probe into possible collusion by the banks.
Welch said the lawmakers had no evidence of collusion. But he said the
timing of the fees merit an investigation. “You don’t have a competitive
marketplace,” Welch said.
Story by Marcy Gordon for the Associated Press
CASH BACK REWARDS STAND OUT IN LATEST CARD OFFERS
Cash is king when it comes to credit card rewards these days. More banks are
venturing where once only Discover tread, by offering credit cards with cash
back as a reward. The trend reflects fierce competition for customers with
high credit scores, and an effort by banks to push existing customers back
to using credit cards instead of debit cards in the face of new regulations.
But the banks aren’t targeting everyone with these offers. Cash back
rewards, especially the cards with the richest programs like the recent
Capital One card, are available mainly to those with excellent credit
Story by Eileen AJ Connelly for the Associated Press
CREDIT CARD ISSUERS CIRCLING SUBPRIME BORROWERS AGAIN
Credit card issuers are knocking on the doors of subprime borrowers again as
they look for ways to grow their business amid stiff competition. The move
is part of a broader effort by banks to lure more credit card customers
after many lenders retrenched from the subprime market. A surge in losses
from soured loans during the recession and a regulatory overhaul prompted
many of the largest credit card issuers to focus exclusively on borrowers
with the best credit. To be sure, banks’ return to subprime credit cards
represents more of a baby step than a full-on race. By and large, issuers
are still approaching the market with caution, offering those customers
small credit lines and charging higher rates, analysts said. But experts
anticipate the trend will accelerate, barring a double-dip recession. And
the latest industry data bear this out. Banks issued 5.4 million new credit
cards to subprime borrowers through June, up 64% from a year earlier,
according to the most recent data from credit bureau Equifax. The company
defines a subprime borrower as having an origination risk score–a
proprietary definition–of less than 660.
Story by Andrew Johnson for the Wall Street Journal
SEVEN TIPS TO AVOID NASTY DEBIT CARD FEES
Debit card consumers are angry and looking to find ways to avoid the new
monthly fees being imposed on this popular payment option. In 2009, debit
cards surpassed credit cards as the most popular form of payment. Debit
cards were easy to use, payments were simple to track, there were no fees
or interest charges, and some debit cards even offered rewards. But now
some of the country’s major banks are charging monthly fees on debit card
usage, sending some consumers scrambling for another option. No one wants
to pay a monthly for using their own money, and if your bank has added a
debit card charge, you have many other options. This is a good time to
research and shop around for the best alternative for your particular need.
Here are seven tips to avoid those very unpopular debit card usage fees.
TWO AIRLINES BATTLE MILEAGE TRACKING WEBSITES
Two carriers have sent “cease and desist” letters in the past year to
several websites that track travelers’ loyalty programs. Southwest argues
the third-party sites threaten security of passenger information; American
doesn’t want outsiders “scraping” data off its website. Sites like
AwardWallet, MileWise and GoMiles have been growing in popularity.
You give the mileage manager account information for all your loyalty
programs, usually airlines, hotels and car rentals to see, in one place,
when miles are about to expire or which program is close to an award
or elite-status level. At the heart of the dispute is a little-known aspect
of programs that will surprise most anyone accumulating frequent-flier
miles: Most airlines claim they–not the travelers–own the miles and
even account passwords. The claim that airlines own the miles has
far-reaching implications. It means consumers can’t sell or barter their
frequent-flier miles or awards, and programs can simply cancel your
miles if you violate rules or don’t meet activity requirements.
Story by Scott McCartney for The Wall Street Journal
IDENTITY THEFT BUST EXPOSES NEED FOR ‘SMART’ CREDIT CARDS
When authorities announced Friday that they had charged more than 100
people in a massive identity fraud operation, they did not just blame the
alleged thieves. They also blamed the credit card companies. At a press
conference, Queens district attorney, Richard A. Brown, accused U.S.
credit card companies of “putting too much money into marketing and
not enough into security” and claimed they “would rather take the losses”
than invest in proven security measures, according to The New York
Times. Deputy Inspector Gregory T. Antonsen, the commander of the New
York Police Department’s Identity Theft Squad, told reporters the bust
showed the need for computer chips implanted in credit cards to deter fraud.
Experts say the United States is far behind Europe in adopting smart cards,
which require cardholders to enter a personal identification number on a
keypad, similar to a debit card transaction. Smart cards deter fraud because
they contain computer chips that encrypt transaction information and require
thieves to not only steal card data but also know the cardholder’s PIN,
experts say. The card’s computer chip also has the potential to generate
one-time-only passwords for more secure online commerce, experts say.
Story by Gerry Smith for the Huffington Post
AN INTERVIEW WITH VISA’S CEO JOSEPH SAUNDERS
Around the world, people use Visa cards to pay for, on average, $643 million
worth of stuff each hour, and Visa, of course, gets a small piece of every
one of those transactions. Rather pay with cash? Visa often gets a cut
there, too, since the company has a growing ATM business. It’s hard to
imagine a business model less “broke” than being the world’s middleman.
“People are using debit and credit cards more. That has counteracted the
weaker spending, and our revenues are growing faster outside the country.
Our goal is to generate more than half of our revenues outside the United
States by 2015. But in order to build a debit card business in a society,
you have to promote them to customers. In order to do that, you need to have
merchants who accept them. It is a chicken-and-egg question. We have
accelerated our investment in Brazil, Mexico, Japan and Australia.”
Story by J. Alex Torquino for SmartMoney