LowCards Credit Card Update October 21
CARD TRICKS WIN BIG REWARDS FOR SOME TRAVELERS
Want a free trip to Paris? Just sign up. Hard-core collectors of frequent-flier miles are turning credit card sign-up bonus offers into vast stashes of miles, points and expensive trips by opening new card accounts by the dozen. Some practitioners call it travel hacking, and at a time when travelers are frustrated by declining service and growing airline fees and fares, it represents a rare travel bonanza. Most new cards are free since issuers typically waive annual fees for the first year. Sign-up bonuses come with requirements to charge $1,000 or so on the card within the first few months. People who churn cards say it’s important to meet these requirements and pay off balances to avoid hefty finance charges. They also typically check their credit ratings regularly. Credit experts say opening and closing card accounts can hurt your credit score, but the degradation is usually small and recovers within a few months.
Story by Scott McCartney at the Wall Street Journal
BANK OF AMERICA LOSES TITLE AS BIGGEST IN U.S.
For Bank of America, it is the end of an era. With the bank shrinking its balance sheet and selling off assets, the company surrendered its title as the country’s biggest bank Tuesday, another sign of how a money-losing giant assembled over decades is being reshaped into a smaller and, investors hope, more profitable institution. Bank of America, with $2.22 trillion in assets reported Tuesday in its third-quarter earnings, is now second to JPMorgan Chase, which has $2.29 trillion assets. It also ranks second to JPMorgan Chase in terms of branches and total deposits.
Story by Nelson D. Schwartz for the New York Times
U.S. TO REQUIRE TRAVEL DECLARATIONS OF VALUE CARDS
International travelers would have to file reports when carrying prepaid access cards and devices loaded with large amounts of money in or out of the United States, under a U.S. Treasury proposal made under pressure from Congress. The rule, unveiled on Wednesday, is not expected to have a substantial impact on ordinary travelers, many of whom use debit or credit cards when overseas. The rule represents an effort to get ahead of what law enforcement officials and others fear could be significant new digital tactics in international money laundering by drug dealers, militant groups and others. The proposal would add prepaid devices–such as prepaid cards, gift cards, and potentially cell phones–to the list of “monetary instruments” whose value must be aggregated. When the total exceeds $10,000, the traveler would have to file a Currency and Monetary Instrument Report CMIR.L under the Bank Secrecy Act, a U.S. law aimed at combating money laundering and tax evasion.
Story by Brett Wolf for Reuters
ATM SUIT AGAINST VISA, MASTERCARD LATEST TUSSLE OVER CARD FEES
The National ATM Council Inc., a group that represents independent operators of automated teller machines, on Wednesday filed a suit in U.S. District Court for the District of Columbia seeking national class-action status accusing Visa and MasterCard of anticompetitive practices. The group argues that rules by Visa and MasterCard requiring ATM operators to charge equal fees to access the credit card companies’ processing networks amount to price-fixing. The group’s members want the ability to charge consumers lower fees if their ATM transactions are completed over smaller processing networks that compete with Visa and MasterCard. Many banks that issue Visa- and MasterCard-branded debit cards also equip their cards with other networks. The inability to charge different prices results in “fees that inflate the retail price of ATM services and discourage consumers from consuming them,” the suit said.
Story by Andrew R. Johnson of the Wall Street Journal
MAJOR CREDIT CARD ISSUERS REPORT GROWTH IN DELINQUENCIES
Credit card delinquencies, defined as payments late by at least 30 days, increased slightly for five of the top six card issuers in September. While these increases were relatively small, it broke the trend of
declining delinquency rates that the industry had recently experienced. It could be a signal that consumers are again struggling to pay down credit card debt and are a higher risk for default in the future. The growth in late payments may lead banks to set aside more money to prepare for future losses. On a positive note, all six major credit card issuers reported further declines in the default or charge-off rates.
CITI’S MOVE TO KEEP CREDIT PORTFOLIO LATEST BOOST FOR CARD INDUSTRY
Citigroup Inc.’s decision to retain rather than sell a portfolio of retail credit cards is the latest boost of confidence for the card industry. Citi’s portfolio includes credit cards issued on behalf of merchants including Sears, Home Depot and Zale. Besieged by high loan-loss rates and a stagnant economy, many lenders that specialized in so-called partnership cards turned their backs on such programs during the recession to get their portfolios in order. But store cards have experienced a resurgence of sorts in the last year as the performance of many lenders has improved, with Citi’s announcement Monday the latest sign of a comeback. Since putting the retail card portfolios in Citi Holdings, the bank has worked to improve its marketing of the programs to ensure it and its partners are targeting the most ideal borrowers.
Story by Andrew R. Johnson for the Wall Street Journal
IN BATTLING MERCHANTS, BANKS STILL HOPE TO OVERTURN DURBIN RULES
The Durbin Amendment–the legislation that limits the fees banks can earn for debit card transactions to a scale that is “reasonable and proportional”–was signed into law more than a year ago. It survived the
financial sector’s strong objections to the Federal Reserve’s aggressive first swing at regulating those fees, as well as subsequent efforts in Congress to delay adoption of the new rules. Those new rules, which were eventually watered down in a compromise that left advocates fuming, took effect October 1. Even so, opponents persist. Last week they rallied behind
a pair of junior representatives, one Republican and one Democrat, who on Tuesday introduced a bill to turn the clock back on interchange fees.