Credit Card Update September 24 2010
COLLEGE TIES TO BANKS, CREDIT CARD COMPANIES MAKING THEM MILLIONS
Colleges, universities and their alumni associations pocket millions of dollars a year via lucrative deals with banks and credit-card companies that peddle to students, faculty and alumni. By selling coveted mailing lists that can number into the hundreds of thousands of names–and even include athletic boosters and school donors–the schools have set up a never-ending stream of revenue that takes little more than a signature to generate. Some schools even get a percentage take of every credit-card purchase or debit-card transaction a student or alumnus makes. Bankers say they’re filling two needs: those of students just getting started and those of schools in need of revenue.
Story by David Migoya for the Denver Post
WARREN REACHES OUT TO BANKERS, PLEDGES CREDIT CARD REVIEW
Elizabeth Warren, who President Barack Obama named an adviser to set up the Consumer Financial Protection Bureau, immediately sought to repair her relations with the financial industry and said the new agency would likely first look into credit-card marketing. One of her first priorities will be to revise credit-card marketing. Credit-card “agreements are still long and they are still hard to read and they are still chock full of surprises. Maybe we need to think about how do you design a credit card agreement from the beginning where ordinary folks can read it in just a few minutes and understand it,” she said.
Story by Hans Nichols for Bloomberg
CONSUMER TIPS FOR AUTOMATED BANKING
Banks have aggressively pushed their customers to online automated banking, even charging more for paper statements. Automated payments and online banking work well and are convenient, as long as banks can assure customers that their money is safe and their accounts are secure. However, if the system goes awry, it can cause significant problems for consumers. Last week, the Chase online banking system had a service outage and was down for three days, leaving 16 million customers without access to their account. Many consumers use credit and debit cards for automatic bill payments. This is a system that typically runs smoothly and on schedule but also makes it easy to forget about the merchants and bills you are paying. If you must replace a card or an account number is changed, these bills aren’t automatically transferred to the new account. It is up to you to immediately contact each merchant and vendor with the new card information to avoid interruption. Keep a record of the name and phone number for every person, business, bill or loan that is paid with an online payment.
YOUR CREDIT CARD ISN’T WORTH AS MUCH AS YOU THINK
If you’re like me, you’re slightly paranoid about your credit card data. You’ve taken all the precautions, checked your statements frequently for fraudulent spending, carefully hidden them in a ‘top-secret’ shoe compartment. Your precious data that you protect so diligently is worth, wait for it, $1.50. That’s because, well, all those security precautions you take don’t really do that much, especially against trojans and hackers who you probably don’t do enough to defend against. There are so many stolen credit cards that they come cheap.
Story by JJ Sutherland for NPR
STORE-BRAND CREDIT CARDS BOOM
The private-label corner of the U.S. credit-card market is enjoying a resurgence as fewer Americans fall behind on their payments. Like the broader credit-card industry, delinquencies on store-brand or private-label cards are slowing. That is good news for retailers such as Target Corp. and Nordstrom Inc. and issuers like Citigroup Inc. and General Electric Co. with hefty holdings of store-brand cards. Issuers of retail credit cards make $16 to $18 of interest and fee income on every $100 loaned out, before subtracting expenses, said Robert Hammer, who runs a credit-card consulting firm. Earnings on general-purpose cards typically are $14 to $15 per $100 loaned. Balances on store cards totaled $94 billion in 2009, down 8% from 2008, according to the Nilson Report, a newsletter that tracks the payments industry. General-purpose credit-card balances declined 13% to $1.89 trillion. Improving credit trends could slow the retreat of private-label card issuers. Some card companies might view store-brand cards as an opportunity to increase their overall loan portfolio.
Story by Aparajita Saha-Bubna for the Wall Street Journal
LOWCARDS.COM WEEKLY CREDIT CARD REPORT
Based on the 1000+ cards in the LowCards.com Complete Credit Card Index, the average advertised APR for credit cards dropped to —, — from last week’s average of 13.66%. Six months ago, the average was 13.72%. One year ago, the average was 12.30%.
DISCOVER AGREES TO BUY CITIGROUP’S STUDENT LOAN CORP
Discover Financial Services agreed to buy Citigroup Inc.’s Student Loan Corp. in a deal valued at $600 million to become the third-biggest U.S. provider of private student loans. Discover may be able to make more credit-card loans by introducing its brand to customers of its expanded student-loan business. “We do expect over time these students and their parents will appreciate the great value we’re providing in student loans, and we hope to certainly attract some of them to credit cards,” said Discover CEO David Helms.
Story by Donal Griffin and Peter Eichenbaum for Bloomberg