LowCards.com Weekly Credit Card Update–October 7, 2016
Credit Card Giants Sued over Chip Readers
A judge is allowing small businesses to sue the major credit card companies for forcing them to adopt chip readers at the checkout counter, a case that could become a multi-billion-dollar class action. The lawsuit takes aim at the nationwide upgrade to chip-based credit cards, an awkward rollout that’s been annoying for stores and shoppers. To business owners, it’s a raw deal. They were forced to upgrade to expensive machines that reduce fraud but don’t eliminate it. If they don’t upgrade, they’re penalized by the credit card companies. Stores that don’t install chip readers are on the hook whenever a shopper swipes a stolen credit card — a burden previously shouldered by banks. The lawsuit, brought by four grocery stores in California, Florida and New York, calls it an industry conspiracy that violates fair trade practices. They sued American Express, Discover, MasterCard and Visa in California federal court in March. Story by Jose Pagliery for CNN Money.
Federal Watchdogs Issue New Rules on Prepaid Cards
For many GenX consumers and millennials, a prepaid card is a lower-cost alternative to a traditional checking account. So why not require more protections on popular, reloadable plastic similar to protections for checking account holders? The Consumer Financial Protection Bureau will put new rules in place beginning October 2017, including disclosure requirements about fees and limit on losses consumers can face when a prepaid card is stolen or lost. Pick up one of these cards from the shelf at the grocery store? Soon, there could be a standard form on the back of the package listing how much it will cost you to check your balance at an ATM or how much you would pay per month if you don’t use the card for a year or so, and other potential fees. The back of the package might also note that after 30 days, the consumer could be offered overdraft coverage or credit, with fees attached to those transactions.Prepaid-card issuers will have to make sure the consumer can afford a credit card before offering the deal. Consumers also could obtain a longer disclosure list of the fees and rules of that particular prepaid card by calling the 800-number on the back of the card or by going to the issuer’s website, also listed on the back of the packaging. Story by Susan Tompor for the Detroit Free Press.
Wells Fargo Account Scandal Extends to Small Business
Wells Fargo’s account scandal is not limited to its consumer banking sector, U.S. Senator David Vitter told the bank’s chief executive in a letter. Thousands of small business owners were also impacted by Wells Fargo’s practices, wrote Vitter, a Republican from Louisiana, in a letter dated Sept. 29 to Wells Fargo chief executive John Stumpf and seen by Reuters. Vitter demanded a “full accounting” of small business owners affected by “fraudulent activity.” Around 10,000 small business accounts were affected by improper Wells practices, people familiar with the matter said. Story by Reuters.
Chip-Enabled Credit Cards Mark a Bittersweet 1-year Anniversary
One year after the U.S. reached a milestone in its switch to credit cards that require a dip instead of a swipe, the ability to use such cards has dramatically increased. But potential headaches loom heading into the holiday season, with some shoppers complaining that checking out with a chip takes too long and stores continuing to encounter delays getting chip-reading terminals up and running. Since then, the pace of adoption has dramatically accelerated. As of July, 88% of MasterCard consumer credit cards in the U.S. were chip-enabled, a 105% uptick since October, while 2 million merchant locations were able to handle EMV transactions. Fraud is also down. According to Visa, counterfeit fraud at merchants able to process chip transactions dipped 47% in May, compared with that same month in 2015. But a shift that the NRF says is costing retailers $30 billion to $35 billion to implement also has its critics. An NRF study released in August found that 76% of retailers said the new chip technology was one of their biggest payment challenges of the past year. Story by Charisse Jones for USA Today.
Illinois Becomes Second State to Sanction Wells Fargo
Illinois State Treasurer Michael Frerichs announced that the state would sanction Wells Fargo after learning of its fraudulent business practices. California placed sanctions against the bank last week. The State of Illinois will suspend business with the bank for at least one year. Frerichs said the move could cost Wells Fargo “tens of millions” in fees and commissions. However, Wells Fargo said the sanctions will likely cost closer to $50,000. The bank has admitted that two million accounts were opened without customers’ knowledge. Employees opened the accounts because they were under pressure to meet sales goals. Senior management allegedly knew about this fraudulent activity. The fake accounts may have damaged customer credit scores and cost millions in service fees. Story by John Oldshue for LowCards.com.
Costco Earnings Show Credit Card Woes Are in the Past
Switching credit cards from longtime provider American Express to Visa has proven to be the right move for Costco. The company reported higher-than-expected profits in Q4, partly thanks to it paying lower fees to its new credit card partner versus its previous one. Many analysts had expected bad news from the retailer partly because of problems caused by the switch to Visa and partly because of the changing retail climate. Instead, the warehouse club delivered earnings of $1.77 a share, up 2% over last year’s Q4 earnings of $1.73 a share. In addition, when factoring out gas sales, the company posted 2% comparable-store sales growth in the United States, 5% growth in Canada, and 1% in the rest of the world, for a total gain of 3%. Story by Daniel B. Kline for The Motley Fool.
Household Debt Rises as Auto and Credit Card Debt See Uptick
Consumers are taking on larger balances for auto loans and credit cards, pushing overall household debt levels higher as consumer confidence levels have also risen. The total outstanding credit card balance is $729 billion, an increase of $17 billion from the first quarter, according to a Federal Reserve Bank of New York Liberty Street Economics blog post in August. Credit card delinquency rates have continued to improve since peaking in 2008. One good sign is that just over 40% of cardholders overall carry a balance of $1,000 or less and 14% have balances over $10,000. Story by Ellen Chang for The Street.
American Express Upping Rewards Program for Platinum Card
American Express will announce a major enhancement to its widely used Platinum Card this week, allowing card members to earn five Membership Rewards points per dollar spent on airlines. The change comes as the credit card giant faces some new entrants into the high-end, luxury credit card space, including JPMorgan Chase’s Sapphire Reserve card launched this summer to great interest, despite its $450 annual fee. AmEx Platinum Card users starting Thursday will earn five points for every dollar spent directly with any airline or on AmEx’s travel website, up from the current one point per dollar earned on airfare. Story by Ken Sweet for the Associated Press.
Mobile Apps Outpace Mobile Web Commerce for First Time
Sales from mobile commerce are up 40 percent this year, making it the fastest-growing channel compared to ecommerce’s 11 percent increase year-over-year, according to a new report from the e-tailing group. Per the report, mobile is by far the fastest growing digital commerce channel. Of those sales, mobile apps make up the majority of mobile commerce transactions, coinciding with mobile app visits surpassing mobile Web visits. In the first quarter of 2016, online sales made up 40 billion dollars. Of that 40 billion, 26.6 billion came from mobile and 13.5 billion came from desktop commerce, making mobile the dominant form of online commerce. Within the 26.6 billion from mobile, the makeup was almost even between sales that came from mobile applications and sales that came from the mobile Web. But for the first time, mobile apps just barely beat out the mobile Web at 13.4 billion to 13.2 billion. Story by Danny Parisi for Mobile Commerce Daily.
Can Credit Cards with CVVs that Automatically Change Every Hour Kill Off Card Fraud?
A French digital payment security company called Oberthur Technologies (OT) thinks it can do away such card-not-present fraud by changing static CVVs to dynamic CVVs, which change every hour. If a crook gets hold of your card number, his or her shopping spree could last no more than an hour; after the security code changes, the card number would be useless. Instead of a CVV printed on the back of a bank card, the Motion Code CVV would be displayed on an e-paper “mini-screen.” The security code would automatically refresh to some random security code every hour. That time is not set in stone. OT noted that whoever issues the card could set the CVV refresh time to any time value. The consumer does nothing different, simply enters the ephemeral security code when making online purchases. Ecommerce sites also don’t need to make any changes to accept payment via cards with Motion Code technology. Story by Ms. Smith for Network World.
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 14.61 percent, slightly higher than last week’s average of 14.62 percent. Six months ago, the average was 14.80 percent. One year ago, the average was 14.58 percent.