Credit Card Update October 15
DISCOVER SAYS US ANTITRUST SETTLEMENT WON’T HELP CONSUMERS
U.S. consumers aren’t likely to benefit from an antitrust settlement that lets merchants offer rewards and incentives to people who pay with lower-cost credit cards, according to Discover Financial Services. “The merchants don’t want to train clerks to do anything other than what is core to their business,” said Diane Offereins, president of payment systems for the Riverwoods, Illinois-based company, in an interview today. “They don’t want people dallying in line having conversations over what they’re going to pull out of their wallets.” The limited scope of the lawsuit was a setback for merchants because payments networks will be allowed to keep rules that bar merchants from surcharging consumers who use credit cards, Offereins said.
Story by Peter Eichenbaum for Bloomberg
CONSUMERS IN CHINA AND BRAZIL DISCOVER DEBT
While consumers throughout the developed world struggle to shed debt, their counterparts in China and Brazil are piling it on. In 2009, the year the global recession hit bottom, the aggregate credit-card balances of Chinese consumers rose 17.1% even as those of U.S. consumers fell 8.7%, according to a study by financial consultancy Lafferty Group. Brazilians increased their balances by 28.9%, part of a 9.2% rise throughout Latin America. More people going into debt might not sound like a desirable development, but in some ways this could be. One of the global economy’s biggest problems has been its dependence on an overstretched U.S. consumer. If folks in places such as China and Brazil are now stepping up and taking on some of the burden, that could provide some much-needed rebalancing.
Story by Mark Whitehouse for the Wall Street Journal
ATTRACTIVE CASH BACK CARDS HAVE LOOPHOLES
Christmas cards and colored lights are already on sale at a number of drugstores-the holiday shopping season is about to begin. This year, if you play your reward cards right, you can quickly earn a Christmas cash bonus on your credit card for your holiday shopping. Banks and issuers are continually tinkering with reward offers to find the right formula that encourages consumers to use their credit card and use it often. Currently, the popular trend is rotating categories that pay larger cash back bonuses. This started with the Discover More card, then the Chase Freedom and Citi Dividend Platinum Select cards also converted to similar formulas. Each of these issuers offers an attractive 5% back on the spending on designated categories for a specific amount of time. Discover and Chase have also sweetened the pot with $100 spending bonuses for reaching a set spending limit.
TEN YEARS LATER, CREDIT CARDS ARE MAINSTREAM IN RUSSIA
Russians now hold 7,600 percent more Visa cards than they did 10 years ago, a number that shows an explosive growth of the market. Visa had issued 70 million cards in Russia as of late June, compared with 924,000 cards as of June 2000, said Steven Parker, Visa’s chief executive for Russia, the Commonwealth of Independent States and southeastern Europe. He said the behavior of Russia’s consumers had changed significantly over the past decade, with more people using plastic cards for everyday payments. Russia’s plastic cards market is much younger than in most developed countries and has a good potential for growth, said Leonid Slipchenko, a banking analyst at UralSib. He said Russians will get hold of even more cards as the level of banking services penetration increases.
Story by Irina Filatova for the Moscow Times
LOWCARDS.COM WEEKLY CREDIT CARD RATE REPORT
Based on the 1000+ cards in the LowCards.com Complete Credit Card Index, the average advertised APR for credit cards is 13.76%, a slight increase from last week’s average of 13.72%. Six months ago, the average was 13.57%. One year ago, the average was 12.44%.
FIRST NATIONAL BANK OF OMAHA TO OFFER ALL FOUR BRANDS
First National Bank of Omaha has joined a small group of the bigger-leaguers in the credit-card business and by doing so, demonstrates intent to be a leader. With its announcement Tuesday of a deal to issue American Express credit cards, First National joins only two other issuers that offer all four big credit card-network brands: MasterCard, Visa, American Express and Discover. The other issuers with all four brands are GE Money and HSBC, First National spokesman Kevin Langin said.
Story by Richard Piersol for the Lincoln Star Journal
PREVENTING A HACK ATTACK
When a giant international cyber-theft ring was broken up last week, details emerged about a new tactic hackers are using: bombarding individual and business phones with incessant calls using automated dialing programs and, while the phones are tied up, raiding bank and brokerage accounts. If the financial institutions can’t reach the victims to ask about the suspicious activity, the transactions often go through, law-enforcement officials say. It is a new twist on so-called denial-of-service attacks, in which hackers overload financial-services websites with information in order to crash them. The ring was responsible for losses of $70 million from accounts at various banks and brokerage firms. The ring allegedly used a “malware” program called “Zeus Trojan” to hijack accounts, embedding it in email messages and attachments. Once installed, it grabbed user names and passwords from banking and brokerage accounts, enabling the alleged thieves to drain the accounts. FBI officials and security experts say the best way to protect against computer-assisted fraud is to use a dedicated computer for online banking and brokerage transactions. Web surfing increases your risk of having malware installed on your computer. Use secure passwords and change them often. Update antivirus and firewall software regularly and be wary of suspicious or unsolicited emails, attachments and links. Check financial statements often and promptly notify financial institutions of suspicious transactions.
Story by M.P. McQueen for the Wall Street Journal