LowCards Weekly Credit Card Update August 2
Grocer Group Slams Swipe-Fee Agreement
The National Grocers Association, one of the plaintiffs suing Visa and MasterCard over credit card transaction fees, said it opposes the $7.25 billion class-action settlement reached in the case earlier this month. The trade group, which represents more than 1,200 companies, is among a growing number of voices to blast the deal for what they say is a failure to address problems in how the card networks set so-called interchange or swipe fees. Target and Wal-Mart Stores, which aren’t plaintiffs, have also criticized the settlement, which requires court approval. The NGA’s decision to oppose the settlement applies only to the trade group itself, not its members, which will have the ability to formally opt in or out of the agreement. Analysts don’t expect enough merchants will opt out of the deal to derail it. If merchants representing 25% of Visa and MasterCard’s credit card sales volume opt out of the settlement, the card networks have the ability to cancel it. The likelihood of that occurring, though, is slim, according to Keefe, Bruyette & Woods, which performed an analysis of sales of the top 100 U.S. retailers. Story by Andrew Johnson for the Wall Street Journal.
Rewards Cards: What’s Next
Are the glory days of reward cards coming to an end? After a year that included some of the most lucrative promotional credit card offers in memory, continued pressure on card companies and their fees is calling into question the future of generous rewards. The latest salvo came two weeks ago, when Visa and MasterCard agreed to settle a raft of lawsuits from retailers, who contend that the payment networks conspired to fix so-called swipe fees–the transaction costs that merchants must pay on every credit card purchase. Swipe fees typically range from about 1% to 3% of the transaction, depending on the retailer and the card used. Rewards-card fees often are on the high end of the range. That has led to concerns that retailers will charge customers more for using rewards cards, or that issuers will trim miles and points. But you shouldn’t panic. Here are four reasons why rewards programs are likely to hang around–and what the settlement really means for cardholders. Story by Karen Blumenthal for the Wall Street Journal.
Capital One to Pay $12 Million Over Military-Lending Claims
Capital One, the bank that paid $210 million over claims it misled credit card customers, will pay $12 million to resolve alleged violations against military families, the U.S. Justice Department said. Under an agreement announced by the Justice Department and the Office of the Comptroller of the Currency, Capital One will pay $7 million to servicemembers whose homes or motor vehicles were unlawfully seized. The bank also agreed to pay $5 million to military borrowers who didn’t get proper benefits on credit card accounts and consumer loans. Story by Phil Mattingly and Jesse Hamilton for Bloomberg.
Visa: Mobile Payments Will Hit Mainstream in Two Years
That vision of paying for goods and services with your phone anywhere you go? You shouldn’t hold your breath. While there are trials and select deployments of payment terminals and cash registers that can accept mobile payments, the method won’t hit the mainstream in the U.S. for another two to three years, according to Bill Gajda, head of mobile for Visa. The problem with getting things moving is twofold: hardware and customer awareness. On the hardware side, payment networks such as Visa and MasterCard are pushing to enable NFC in more terminals. Despite a vow to get NFC into newer terminals, the transition depends on how fast retailers are willing to upgrade their point-of-sale terminals. Story by Roger Cheng for CNET.
The Return of Debit Card Rewards?
Debit rewards have been disappearing, but analysts say a new card could trigger a comeback. Earlier this week, Chase introduced the Disney Visa debit card, which offers cardholders deals including 10% off at select Disney resort restaurants and a $50 onboard credit for Disney Cruise Line vacations. Many perks are identical to those on the two Chase-branded Disney credit cards, except for the rewards: credit customers earn at least 1% back to redeem toward future Disney purchases, while debit customers earn nothing. But experts say Chase’s new card may signal a shift to debit cards that offer more perks–without reward points. “Everybody is going to be looking at this to see if it gets any traction,” says Dennis Moroney, a director of research at Tower Group. The discounts and special offers are likely to appeal to consumers, he says, while Chase and Disney could win extra customers. Story by Kelli Grant for SmartMoney.
Financial Tips for Students Going Off to College
It is almost time for high school graduates to go off to college, moving away home for the first time. As parents give last-minute lessons about independence, money management should be an important part of these discussions. It is critical that your student knows about budgeting money, staying out of debt and building a good credit score. This is also the time to talk with your student about the payment plan for college tuition. College loans have become a major burden for millions of Americans, dragging students deep into debt before they even get started in the workplace. College students in the class of 2010 who took out loans to fund their college education owed an average of $25,250, according to a report from the Institute of College Access and Success. Here are some tips about financial planning with your college student. Story by Bill Hardekopf for LowCards.com.
New York Banks Sues Big Banks Over Alleged Libor Manipulation
A New York lender has sued a group of large banks on the panel that sets a key global interest rate, saying it was cheated out of interest income through alleged rate manipulation. The lawsuit, filed last week in District Court in Manhattan, seeks class-action status on behalf of similar lenders. Berkshire Bank, which is not connected to Warren Buffett’s Berkshire Hathaway, says borrowers were able to take advantage of artificially low interest rates because of the big banks’ “unlawful suppression” of benchmark rates. At least one other community bank has filed similar legal claims, a sign that the rate manipulation scandal is having a broad impact. The Community Bank & Trust of Sheboygan, Wisconsin, said in a lawsuit several months ago that alleged rate rigging had kept its interest margins artificially low. That lawsuit also is pending in District Court in Manhattan. Story by Sakthi Prasad for Reuters.
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 14.34 percent, slightly lower than the 14.35 percent last week. Six months ago, the average was 14.25 percent. One year ago, the average was 14.15 percent.