LowCards.com Weekly Credit Card Update–June 2, 2017
Credit Scores Hit Record High as Recession Wounds Heal
Credit scores for U.S. consumers reached a record high this spring while the share of Americans deemed to be some of the riskiest borrowers hit a record low, a potential boon for lending and economic activity. Consumers’ improving fortunes reflect falling unemployment and continued, if lackluster, economic growth. An added benefit: The passage of time since the recession and housing meltdown are helping household balance sheets. In ever-growing numbers, the worst personal financial setbacks, namely foreclosures and bankruptcies, are falling off Americans’ credit reports. More than six million U.S. adults will have personal bankruptcies disappear over the next five years, according to a recent Barclays PLC report. Wiping away such negative events also helps boost consumers’ credit scores. Lenders rely on both the reports and scores when determining whether to approve consumers for loans and at what interest rates. Story by AnnaMaria Andriotis for The Wall Street Journal.
Credit Card Breach at Kmart Stores. Again.
For the second time in less than three years, Kmart Stores is battling a malware-based security breach of its store credit card processing systems. Last week I began hearing from smaller banks and credit unions who said they strongly suspected another card breach at Kmart. Some of those institutions received alerts from the credit card companies about batches of stolen cards that all had one thing in common: They were all used at Kmart locations. In October 2014, Sears announced a very similar breach in which the company also stressed that the data stolen did not include customer names, email addresses or other personal information. Both breaches involved malware designed to steal credit and debit card data from hacked point-of-sale (POS) devices. The malware copies account data stored on the card’s magnetic stripe. Armed with that information, thieves can effectively clone the cards and use them to buy high-priced merchandise from electronics stores and big box retailers. At least two financial industry sources told KrebsOnSecurity that the breach does not appear to be affecting all Kmart stores. Story by Brian Krebs for Krebs on Security.
Amex Outduels Citi for Exclusive Rights to Hilton Credit Cards
American Express has struck back against Citigroup, winning exclusive rights to issue credit cards for Hilton Worldwide Holdings Inc. and ending an agreement in which the two banks shared the business. The arrangement takes effect Jan. 1. Amex’s Starwood Preferred Guest card, which accounts for about 4 percent of the company’s loans and 2 percent of total spending, is at risk after Marriott International Inc.’s takeover of rival Starwood Hotels & Resorts Worldwide. Marriott has a co-brand deal with Chase and Visa. Amex winning the Hilton portfolio takes some of the sting out of losing its partnership with Costco, a much bigger partnership that accounted for 20 percent of worldwide loans and 8 percent of card spending. The largest U.S. warehouse chain decided in 2015 to end its 16-year relationship with Amex after the firms couldn’t agree on card fees. Last year, Citigroup became the exclusive credit-card issuer for the retailer. Citigroup said the terms of the Hilton deal didn’t make economic sense for a relatively small portfolio. Hilton represents about 1 percent of the bank’s $126.4 billion U.S. credit-card loans. Story by Jennifer Surane for Bloomberg.
Amazon to Refund $70 Million for Unauthorized In-App Purchases
Amazon has started refunding parents for unauthorized in-app purchases their children made as part of an agreement with the Federal Trade Commission. The FTC says approximately $70 million in charges may be eligible for reimbursement. Amazon’s Appstore was launched in 2011, ad at the time, it did not require passwords for in-app purchases. Children were able to buy special add-ons for their favorite apps without their parent’s permission. Amazon updated the store in 2012 to include password protection, but that was only for purchases over $20. The site has since fixed these issues, but the FTC is requiring Amazon to refund parents for any unauthorized purchases. Story by Bill Hardekopf for LowCards.com.
Spending On Credit Card Rewards Has More Than Doubled
Reward credit cards have never been more lucrative. Spending has more than doubled since after the Great Recession, reaching a record $22.6 billion in 2016. The trend continued into the first three months of 2017, when credit card issuers spent $6.2 billion, compared to just $5.1 billion during the same period last year. For years, American Express dominated the market for credit card rewards. However, under the leadership of many former American Express executives, Chase has been aggressively investing in new products and chasing American Express’ most lucrative customers. In 2016, for the first time, Chase spent more than American Express on rewards. Citi, copying Chase’s playbook, also hired a former American Express executive and started spending heavily on rewards. Citi launched a cash back credit card paying up to 2%, revamped its ThankYou rewards program and won the Costco deal from American Express. Citi’s spending on rewards tripled since 2010, the largest percentage increase of any major issuer. Story by Nick Clements for Forbes.
Costco Reports 2 Million New Visa Credit Cards Since Last Summer’s Launch
Costco Wholesale added a total of about 2 million new co-branded Visa credit cards since last summer, when the company began offering the new cards. Costco signed an exclusive agreement with Citigroup in 2015 to provide Costco-branded Visa credit cards for customers, ending a 16-year partnership with American Express. The new Visa cards went live in June, switching almost 12 million accounts from American Express to Visa. About 1.5 million new co-branded credit card accounts, or about 2 million actual credit cards, have been approved since the launch, up from the 1 million accounts reported for its first quarter, which ended Nov. 20. Story by Coral Garnick for Puget Sound Business Journal.
New York City Suspends Municipal Business with Wells Fargo
New York City voted on Wednesday to suspend Wells Fargo from its municipal debt issuance operations, citing a rating tied to doing business in low and moderate-income communities as having fallen below a “satisfactory” level. The commission also cited last year’s scandal, in which the bank was caught creating bogus customer accounts to boost performance measures. The New York City Banking Commission, in a unanimous 3-0 vote, decided it will give no new bond underwriting mandates or renew existing contracts with Wells Fargo. The decision follows a Federal Community Reinvestment Act rating of “needs improvement” for the San Francisco-based bank. The decision adds New York City to other states and municipalities that have banned the bank from handling their funding operations. Story by Dan Freed for Reuters.
Android Pay Launches in Canada as Contactless Payments Continue to Soar
Android Pay launched in Canada on Wednesday, with support from three of the five major banks and support for both credit and debit cards announced. Android Pay is starting its rollout to the Canadian market with ATB Financial, BMO, Canadian Tire, CIBC, Desjardins, National Bank, PC Financial, Scotiabank, and Tangerine. It will be using the tokenization services offered by Visa, Mastercard, and Interac here to authenticate payments, with support for Interac cards expected to go live June 5. Android Pay debuted in the U.S. in September of 2015 and is seeing adoption at a pace of 1.5 million new registrations per month. Worldwide, it’s accepted in more than 2 million locations. Google expects that adoption in Canada could show an even steeper hockey stick curve on the adoption graph. Story by Brian Jackson for IT World Canada.
UK Credit Card Borrowing Grows at Fastest Pace in 11 Years
The amount Britons borrowed on their credit cards grew at the fastest pace in 11 years in April, as consumers continued to spend despite higher inflation squeezing incomes. Bank of England figures published on Wednesday showed the outstanding amount borrowed on credit cards hit £68.1bn in April, an increase of 9.7 per cent on the previous year and the fastest rate of credit card borrowing growth since February 2006. The figures will heighten concerns at the BoE that the rapid increase in credit card borrowing is unsustainable and driven by deteriorating underwriting standards among lenders, which could lead to a crunch if left unchecked for too long. Economists said that although additional consumer credit, which has continued to rise at double-digit rates, helped families to smooth the adjustment to higher prices in shops, the rise in debt would not ultimately prevent consumers reining in spending as real incomes fell. Story by Chris Giles for the Financial Times.
Mark Cuban: ‘Don’t Use Credit Cards’
Billionaire entrepreneur Mark Cuban is famously blunt. So, when Inc. asked him in a 2017 interview to share his best money advice, the star of ABC’s “Shark Tank” and the owner of the Dallas Mavericks didn’t mince words. “From my dad,” he said. “Don’t use credit cards.” The one thing he wishes he had known about money in his 20s, he told Business Insider in 2014, is “that credit cards are the worst investment that you can make. That the money I save on interest by not having debt is better than any return I could possibly get by investing that money in the stock market. “I thought I would be a stock market genius. Until I wasn’t. I should have paid off my cards every 30 days.” Story by Kathleen Elkins for CNBC.
Lloyds Plays Catch Up with Barclays as it Boosts Share of Credit Card Market with MBNA Takeover
Lloyds Banking Group is set to nip at the heels of rival Barclays in its share of the credit cards market following the acquisition of MBNA. The £1.9bn takeover of the credit card business from Bank of America’s wholly-owned subsidiary FIA Jersey Holdings Limited, will bolster Lloyds’ market share from 15% to 26%. It would place Lloyds just behind Barclaycard, which has a 27% share of the UK’s credit card market. MBNA is one of the UK’s largest credit card issuers with about seven million customers, including its own brands and the official cards of major football clubs, including Arsenal and Liverpool. The business reported post-tax profits of £123mln in the first half of 2016. The deal to buy MBNA is the first acquisition by Lloyds since the financial crisis when the government had to rescue the bank by injecting £20.3bn to buy a 43% stake in 2009. Story by Renae Dyer for Proactive Investors.
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 15.26 percent, slightly higher than last week’s average of 15.25 percent. Six months ago, the average was 14.70 percent. One year ago, the average was 14.72 percent.