LowCards.com Weekly Credit Card Update December 28
A Wall Street Journal investigation found that the Staples website displays different prices to people after estimating their locations and appeared to consider the person’s distance from a rival brick-and-mortar store, such as OfficeMax or Office Depot. If a competing store was within 20 miles or so, Staples.com usually showed a discounted price. Offering different prices to different people is legal but price-changing online isn’t popular among shoppers. Some 76% of American adults have said it would bother them to find out that other people paid a lower price for the same product. Story by By Jennifer Valentino-Devries, Jeremy Singer-Vine and Ashkan Soltani for the Wall Street Journal.
The Great Christmas Credit Card Fiasco of 1966
As Christmas approached in 1966, Chicago’s banks unintentionally gave criminals the best gift of all: free credit cards. In Chicago, the city’s major banks joined with the smaller Pullman Bank & Trust to form the Midwest Bank Card Association, an interchange network similar to today’s MasterCard and Visa, which made each bank’s cards acceptable by all merchants participating in the system. By starting their programs in November, the Chicago banks dropped millions of cards into a postal system already oversaturated with holiday mail. The banks also announced what they were doing publicly, lighting a beacon for Chicago’s well-organized underworld. Estimates of the losses from the debacle range from $6 million to $12 million. The incident prompted Congress’s first substantial attempt to regulate the emerging bank credit card industry, including a ban on unsolicited credit card mailing and a cap of $50 of consumer liability for a lost or stolen card—reforms we still have today. Story by Sean Vanatta for Bloomberg.
Making it Easier to Estimate Libor Losses
The potential victims of the Libor scandal are starting to estimate the costs to their bottom lines. A new report indicates that Fannie Mae and Freddie Mac, the mortgage entities that the government bailed out and now controls, may have suffered big losses related to the manipulation. Rate-rigging may have cost the two firms more than $3 billion over two years, according to the Federal Housing Finance Agency. Story by Peter Eavis for the New York Times.
Discover Posts Smaller-Than-Expected Profits
Discover reported a smaller-than-expected profit in its fiscal fourth quarter as the company set aside more money to cover loan losses and the costs of new partnerships. With a boost from the early holiday shopping season and strong loan quality, it’s credit card portfolio grew 6.4 percent from a year earlier to $49.6 billion. Loan growth has been harder to find since the financial crisis as many consumers have reined in their use of revolving credit, opting instead to pay their balances off each month. Discover has ramped up direct-mail offers as other lenders have pulled back. Credit card lenders use promotional rate offers to entice new customers to open accounts and transfer balances carried on other credit cards that may incur higher rates. Story by Andrew Johnson for the Wall Street Journal.
Gift Card Sales Continue to Soar
A new study gives more evidence about American’s growing love affair with gift cards. Approximately 85 percent of Americans will purchase a gift card in 2012. Sales will exceed $110 billion, and spillage–the amount of money that goes unused on a gift card–will drop to $1.7 billion. Gift card sales are expected to reach $130 billion by 2015. The good news for retailers is that 30 percent of recipients will spend at least $25 more than the value of the card when they go to redeem the card. Electronic gift cards are only predicted to reach $3 billion in 2012. However, sales of these electronic cards are projected to reach $16 billion by 2015. Story by Natalie Rutledge for LowCards.com.
Debt Ceiling Rises Again as Threat for the U.S.
The three major ratings agencies shrugged off this week’s breakdown in talks aimed at ending the fiscal impasse, saying their outlook for America’s sovereign debt was already negative and would not immediately change. They are anticipating another looming fiscal deadline–a date sometime in February or early March when the United States government risks running out of cash if Congress cannot find a way to raise its statutory debt ceiling. This could be more of a threat to the nation’s credit rating than the fiscal cliff. Story by Mary Williams Walsh for the New York Times.
Consumers Climb Out of Debt
American incomes have not grown much since the recession ended more than three years ago, but there is something to show for the recovery: household debt payments are at their lowest level in decades and this is helping paychecks stretch further. In the third quarter, households spent 10.6 percent of their after-tax income on debt payments in the third quarter of the year, the lowest level since 1983. Many families have devoted much of the past five years to working off debts and rebuilding savings. Tighter lending standards have limited borrowing for many people. Record-low interest rates have made it far cheaper to buy a car or house and have allowed millions of families to refinance their mortgages. Story by Ben Casselman for the Wall Street Journal.
Why Private Label Credit Cards Have Defied Doomsayers
Private Label Is Dead. The headlines proclaimed this just a few years ago and it seemed like every retailer was leaving the space, or at least considering it. Yet today, we see new headlines announcing private label deals by the dozen. Clearly, the doomsayers were missing something. They ignored that retailers have carried their own credit since retail was invented. They also missed how important controlling in-store credit can be to the bottom line. Story by Eric Lindeen for American Banker.
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 14.35 percent, slightly higher than last week’s average of 14.32 percent. Six months ago, the average was 14.30 percent. One year ago, the average was 14.00 percent.