LowCards.com Weekly Credit Card Update–June 17, 2016
Home Depot Files Antitrust Lawsuit Against Visa, MasterCard
Home Depot filed an antitrust lawsuit against Visa and MasterCard reigniting claims from a decade ago that merchants pay too much for debit and credit card transactions and adding new contentions about the effectiveness of chip-based cards to reduce fraud. The lawsuit comes several years after Home Depot and hundreds of other retailers opted out of a settlement, then valued at $7.25 billion, in a price-fixing case that addressed many of the same issues. This time, the do-it-yourself retailer also contends that Visa and MasterCard colluded to prevent the adoption of new chip-based cards that require consumers to enter a personal identification number, or PIN, to authorize a transaction. Story by Robin Sidel for The Wall Street Journal.
Federal Court Rules Fourth Amendment Does Not Apply To Police Scanning Credit Cards
A federal appellate court ruled last week that law enforcement agencies can scan credit, debit and gift cards without running afoul of the Fourth Amendment’s protection against unreasonable searches. Given last week’s revelations that police have specially designed readers to freeze and seize money stored on prepaid debit cards, this decision could have major consequences for American motorists. Story by Nick Sibilla for Forbes.
Florida Bank to Offer First Credit Cards for Use in Cuba
A small regional Florida bank is making history. Stonegate Bank is issuing the first credit card that can be used in Cuba since Washington and Havana normalized relations. The card will be a limited-edition MasterCard. Stonegate will issue only 1,000 cards initially. Each card will feature artwork by celebrated Cuban painter Michel Mirabal. The Cuban government will waive the usual 10 percent penalty on dollar exchanges for those using the Stonegate cards. Story in Voice of America.
Walmart Canada Will No Longer Accept Visa Cards Due to High Fees
Shoppers visiting Walmarts in Canada will no longer be able to use their Visa cards to pay, as the retailer could not reach an agreement with the credit card company. Walmart cited Visa’s fees as the reason the two entities could not reach a deal. In their statement, the company called these fees “unacceptably high.” Last year, Walmart said it paid more than $100 million in credit card fees, but it did not specify how much of this total went to Visa. Story by Bill Hardekopf for LowCards.com.
Card Issuers Tumble After Synchrony Sees Higher Write-Offs
Credit card issuers were among the worst performing U.S. stocks Tuesday after Synchrony Financial said it expects higher write-offs within the next year as consumers struggle to repay loans. Synchrony tumbled 13 percent to $26.45, the biggest drop since its 2014 initial public offering, and American Express Co. fell 4.1 percent, the most in the Dow Jones Industrial Average. Capital One Financial Corp. slid the most in almost a year, and Discover Financial Services also declined. Synchrony expects write-off rates to climb 20 to 30 basis points over the next 12 months, and will increase reserves for soured loans beginning this quarter. Write-offs as a percentage of total average loans were 4.7 percent in the first quarter, up from 4.53 percent a year earlier, the company said in April. Story by Jennifer Surane for Bloomberg.
Chase Fees Draw Ire of Former Inmates
Chase applies various fees to the ATM cards it provides federal prisoners so that accounts are useless on the outside, a class of former inmates claims. Lead plaintiff Brett Sheib took on JPMorgan Chase & Co. in a 32-page lawsuit filed in Brooklyn Federal Court. He says he and others released from prison face “unfair and unconscionable practices” that make it impossible to access their money once they get out of the federal prison system, “all without an iota of consent.” Sheib says inmates can earn 17 cents an hour, and that they get money from friends and family that then gets placed on an inmate’s card for use at the commissary, for phone calls or for other things. But, when released, they’re slapped with heavy and arbitrary fees for using that card, Sheib alleges. Story by Nick Divito for Courthouse News Service.
IRS Scammers Demand Tax Payments on Gift Cards
The Treasury Inspector General for Tax Administration warned Tuesday about a new twist in the IRS impersonation scam, with fraudsters pretending to be Internal Revenue Service employees demanding taxpayers send them tax payments not only on iTunes gift cards, but on other types of gift cards as well. TIGTA issued an alert in April saying it has received information that callers impersonating IRS employees or the Treasury Department are demanding payments on iTunes gift cards. In addition to gift cards, TIGTA said the scammers may also request payment of taxes on Green Dot Prepaid Cards, MoneyPak Prepaid Cards, Reloadit Prepaid Debit Cards, and other prepaid credit cards. It reiterated that these are fraudulent calls. Story by Michael Cohn for Accounting Today.
20 Million Reasons Why Starbucks’ Rewards Program Is So Powerful
Starbucks loaded around $1.6 billion on gift cards this past holiday season, and the company estimates that one in seven Americans received one as a gift. Like any savvy business, Starbucks doesn’t leave that money sitting in the till to make change. It reinvests it, preferring to earn interest on high-grade corporate bonds, Treasury notes, and certificates of deposit. Starbucks currently has $1.2 billion in deposits on its books, according to a study by The Wall Street Journal — more than many financial institutions have, including Discover Financial Services, and more than a third of American Express’ holdings. On breakage income alone, or income resulting from lost or unused gift cards, Starbucks earned $39.3 million last year. That income is equivalent to the estimated operating profit from 320 company-owned stores. With $5 billion in card transactions every year, Starbucks would be able to earn $50 million in interest income with a 1% interest rate. Combined with the breakage income, that would be about $90 million, or the equivalent of about 700 company-owned stores. While that’s still a small percentage of Starbucks’ more than 12,000 stores, $90 million is more profit than many smaller restaurant chains have. Story by Jeremy Bowman for The Motley Fool.
Card Issuers Lose $10.9 Billion to Fraud
Credit unions and other card issuers are losing a whopping $10.9 billion a year to fraud and criminals appear to be attacking from all angles, a new LexisNexis Risk Solutions study said. The study of 100 risk and fraud decision-makers and influencers working at U.S. card issuers reported 71% of card fraud now comes from credit cards – three times the fraud from debit cards, which accounted for 25% of the total. Prepaid cards contributed only half a billion in fraud losses, the study said. Story by Tina Orem for the Credit Union Times.
Mobile Payments Slow, But Tech Changing Retail Experience
Shoppers consider mobile payments to be the least secure of all the various avenues for purchase. As such, they’ve been somewhat reluctant to adopt the technology, but slower growth doesn’t mean the tech won’t change how people buy things. It just means it will happen slower. Some 36% of consumers have used some form of mobile payment in a store within the past year, while 33% have used a peer-to-peer payment app. Another 61% cite security and 58% cite privacy as their main concerns about the technology. Many retailers still don’t offer a mobile payment option, and the survey concludes that consumers would be more likely to adopt the tech if the option was more ubiquitous. Story by Ben Frederick for Media Post.
LowCards.com Weekly Credit Card Rate Report
Based on the 1,000+ cards in the LowCards.com Complete Credit Card Index, the average advertised APR for credit cards is 14.70 percent, slightly lower than last week’s average of 14.71 percent. Six months ago, the average was 14.62 percent. One year ago, the average was 14.60 percent.