Weekly Credit Card Update July 8
BANKS BILLION DOLLAR IDEA: SELL YOUR SHOPPING DATA
Banks have found a new revenue stream–and this time, it doesn’t involve hitting you up with a new fee. Many of the nation’s leading banks and card issuers, including Wells Fargo, Citi, USAA, Sovereign Bank and Discover, are selling information about consumers’ shopping habits–how much they spend, where they shop and what they buy–to retailers, which are using the data to offer targeted discounts via text, email and online bank statements. Each time a consumer cashes in on one of those deals, the retailer pays the bank a nice commission. Cardlytics, which provides similar services for 125 banks and a network of retailers, says merchants pay banks an average fee of 10%
to 15% of the purchase price of a product each time a customer uses a discount that’s generated from the bank’s data. Typically, the bank takes a 25% cut of that fee and pays an intermediary, like Cardlytics, the rest. So if a customer buys a $1,000 couch, the merchant pays a fee of up to $150 to the bank and the bank walks away with $37.50. Here’s how it works: Say you use your Citi-issued debit card to buy a pair of shoes at Nordstrom, and then Citi sells that information to a series of retailers. As a result, you receive a coupon from Macy’s for a 20% discount on shoes at its store. The coupon is delivered by Citi, however, not from Macy’s.
Story by Blake Ellis for CNN
U.S. CONSUMER LOAN DELINQUENCIES ROSE IN FIRST QUARTER
U.S. consumer loan delinquencies rose in the first quarter as high gas prices and unemployment stretched the budgets of consumers, the American Bankers Association said. Overdue payments on credit cards rose by 12 basis points, to 3.4 percent, after delinquencies dropped last quarter to the lowest level in almost a decade. “It’s hard to see dramatic improvements in delinquency rates when the economy still is barely moving forward,” James Chessen, the Washington-based group’s chief economist, said in a statement. “Until the economy shifts up a gear, employment improves and food and gas prices stabilize, some people will struggle to make ends meet.”
Story by Phil Mattingly for Bloomberg
AS PLASTIC REIGNS, THE TREASURY SLOWS ITS PRINTING PRESSES
The number of dollar bills rolling off the great government presses fell to a modern low last year. Production of $5 bills also dropped to the lowest level in 30 years. And for the first time in that period, the Treasury Department did not print any $10 bills. The meaning seems clear. The future is here. Cash is in decline. In 1970, at the dawn of plastic payment, the value of United States currency in domestic circulation equaled about 5 percent of the nation’s economic activity. Last year, the value of currency in domestic circulation equaled about 2.5 percent of economic activity.
Story by Binyamin Appelbaum for the New York Times
CREDIT CARD PERKS UNKNOWN TO MAJORITY OF USERS
According to a new study by MasterCard, 55% of consumers were not familiar with the perks and benefits of their credit card. Some even paid extra for benefits they already had with their card. Credit cards are subject to a lot of criticism over interest rates and fees, but their benefits are often overlooked. Most consumers know about the cash back or mileage rewards of their card. But it is worth the time to go through the welcome packet of your new card, or the terms and conditions of any card you may be considering, to see the significant perks offered by that card. Most credit cards offer services like lost luggage reimbursement, car rental damage insurance, or purchase protections that can help you through difficulties and save you some money. These perks are wasted if you don’t know about them. Here are some of the standard benefits offered by credit cards issuers. These vary by issuer and type of card.
CREDIT CARDS WITHOUT FOREIGN TRANSACTION FEES
The list of cards that have eliminated foreign transaction fees, which tack up to 3 percent onto your purchases, is growing, and using the right card can save you money on your vacation. The latest entry to the field is the Chase Sapphire Preferred Card. The card carries no foreign transaction fees and is offering a bonus of 50,000 rewards points if you spend $3,000 in the first three months. The card has a $95 annual fee, but it’s waived for the first year.
Story by Ann Carrns for the New York Times
REGIONS CLOSES BUYOUT OF $1 BILLION CREDIT CARD PORTFOLIO
Regions Bank has completed the buyout of a $1 billion portfolio of its branded credit cards from a subsidiary of Bank of America, the company said Tuesday. Terms were not disclosed for the deal, which was originally announced last month. The portfolio consists of 500,000 existing consumer accounts held by Regions customers and 40,000 business credit cards accounts. Together the two portfolios total more than $1 billion. Regions said the deal will help it balance its consumer and commercial loan portfolios and further diversify its revenue sources.
Story in the Associated Press
FDIC PROBING DISCOVER PAYMENT PROTECTION PLAN
Discover disclosed that the Federal Deposit Insurance Corp. was “reviewing the Company’s marketing practices with respect to its fee-based products, including its payment protection fee product, which could lead to an enforcement action.” Discover reported the FDIC scrutiny and possible regulatory action in its first-quarter 10-Q filing with the Securities and Exchange Commission. The filing added that Discover also has eight class action cases pending against it, also “in relation to the sale of the Company’s payment protection fee product.” The company’s Payment Protection service allows a credit card customer to put loan payments “on hold for up to 2 years in the event of disability, hospitalization, or other qualifying events, depending on the product level,” also offering death benefits to borrowers, depending on the state in which a borrower resides. The Payment Protection service also allows a borrower to put “payments on hold for 1 billing period for the following Celebration Events,” including marriage, childbirth, retirement, graduation and other events. A disclosure page on the company’s website, says that the fee for the service is a credit card borrower’s “total balance at the end of each monthly billing period (including any partial monthly billing period at the beginning of your enrollment), multiplied by 89¢ per $100.” Considering that on an annual basis, the fee would come to over 10.5%.