Weekly Credit Card Update September 17
MASTERCARD SEES SURGE IN CHINA CREDIT CARD USE
MasterCard Inc. said it expects China to overtake the U.S. as the world’s largest credit-card market by number of cards by 2020 because of the country’s fast urbanization. Chen Bin, client business leader at MasterCard Advisors in China, said China will likely have 800 million to 900 million credit cards in issue by 2020. Credit cards have become popular in China only over the past few years, as consumer demand has risen. Statistics from China’s central bank show China had around 207 million credit cards in issue at the end of June, up 10% from the end of last year and more than quadruple the level at the end of 2006.
Story by Rose Yu for the Wall Street Journal
CARD DELINQUENCIES FALL, BUT LENDERS STRUGGLE TO GROW
Fewer Americans fell behind on their credit card loans in August, but improvement is coming at a slower pace, suggesting banks’ consumer loan losses may take years to return to normal levels. Bank of America and JPMorgan Chase reported their lowest monthly delinquency rates of the year on Wednesday. Their overall loss rates rose slightly in August, but analysts largely dismissed that as an expected seasonal uptick. While lenders welcome the ongoing improvement in credit card delinquencies, they are struggling with weak consumer demand for new loans as unemployment remains high and the economic recovery is uncertain.
Story by By Maria Aspan and Brenton Cordeiro for Reuters
WILL SMARTPHONES REPLACE CREDIT CARDS?
Smartphones can be customized to do almost anything except vacuum the floor and pay for purchases. While smartphones may never replace your vacuum cleaner, they may one day take the place of your credit card. The United States is one of the few remaining developed countries that still uses magnetic strip credit cards. Many countries have switched to contactless payment systems with advanced technology. In the U.S., banks and retailers have not rushed into contactless payment systems because the changes are expensive. Each reader costs approximately $200 and the expense quickly adds up for retailers. AT&T, Verizon, T-Mobile, and Discover Financial Services are joining together to create a new processing system that allows consumers to wave their smartphones at cashier readers to make a payment.
DO YOU LIVE IN A HIGH-DEBT CITY?
Is your city making you overspend? High housing prices, exorbitant living
costs, and cultures of spending mean residents in some areas tend to rack up
much more debt than others. Denver, Seattle, Dallas, and Phoenix rank among
the most indebted cities, with average debt levels of $26,100 and higher,
according to an analysis by the credit reporting agency Experian. The 10
most frugal states are concentrated in the South, and include South
Carolina, Alabama, Georgia, and Mississippi. States with the biggest
spenders are primarily on the East and West coasts, and include Washington,
D.C., Maryland, New York, and California.
Story by Kimberly Palmer for US News and World Report
NEW GLOBAL BANKING RULES
Global regulators have agreed on new banking rules aimed at averting another financial collapse. The new rules, which will gradually require banks to hold greater capital buffers to absorb potential losses, are likely to reshape the credit industry by imposing stricter discipline on credit cards, mortgages and other loans. The requirements will be phased in over a period of years. Requiring banks to keep more capital on hand will restrict the amount of loans they can make, but it will make them better able to withstand the blow if many of those loans go sour. The rules also are intended to boost confidence that the banking system won’t repeat past mistakes. U.S. officials including Federal Reserve chairman Ben Bernanke issued a joint statement Sunday calling the new standards a “significant step forward in reducing the incidence and severity of future financial crises.” The agreement, known as Basel III, is seen as a cornerstone of the global financial reforms proposed by governments stung by the experience of having to bail out some ailing banks to avoid wider economic collapse.
Story by Greg Keller for the AP
LOWCARDS.COM WEEKLY CREDIT CARD REPORT
Based on the 1000+ cards in the LowCards.com Complete Credit Card Index, the
average advertised APR for credit cards dropped to 13.66%, down from last week’s
average of 13.83%. Six months ago, the average was 13.75%. One year ago, the
average was 12.09%.
JP MORGAN CHASE’S ONLINE BANKING OUTAGE SPARKS QUESTIONS
It will take JPMorgan Chase days, if not weeks, to get to the bottom of what caused a three-day outage of its consumer online banking system on Monday, Tuesday and Wednesday, cybersecurity experts say. Bank officials have indicated that they have ruled out an online attack and believe the outage stems from problems with a third-party software vendor. However, cybersecurity experts say investigators will have to do a lot of digging to isolate the specific trigger. Given the scale and complexity of the bank’s online systems, it is much too early to rule out some sort of malicious attack as possibly contributing to the outage, they say.
Story by Byron Acohido for Technology Live
MEMBERSHIP REWARDS WILL END RELATIONSHIP WITH CONTINENTAL
American Express announced this morning that it would no longer allow its charge card customers to redeem their Membership Rewards points for frequent flier miles in Continental’s OnePass program come Sept. 30, 2011. Why would the company do such a thing? Well, it’s almost certainly not Amex’s doing. Instead, it has to do with the fallout from the coming merger of Continental and United. This creates the possibility of a lot of increased liability for miles for the combined airline, which isn’t a good thing under any circumstance. But the party that was probably most instrumental in this move was Chase, which issues credit cards that earn both United and Continental miles. Amex is also trying to hang on to some Continental and other airline fans with a new benefit for Platinum and Centurion (a k a, “Black Card”) customers. Starting December 1, you can register your favored airline with Amex and it will waive up to $200 in fees (like those for baggage checking, in-flight food purchases, airport club day passes and flight changes) with that airline each year.
Story by Ron Lieber for The New York Times
CITIGROUP HIRES LINVILLE FOR US CREDIT CARDS UNIT
Citigroup Inc. hired Judson Linville from American Express Co. to oversee
U.S. credit cards, as the industry grapples with loan writeoffs, a decline
in card spending and new laws capping interest rates. While first-half
revenue in Citigroup’s North American branded card business more than
doubled to $4.89 billion, net credit losses rose almost ten-fold to
$4.13 billion, according to the bank’s financial statements. In July,
Citigroup’s 30-day delinquency rate was 5.3 percent, the second-highest
of the six biggest U.S. credit-card lenders after Bank of America’s 5.9 percent.
Story by By Bradley Keoun and Donal Griffin for Bloomberg
VISA AFFIRMS NET REVENUE GROWTH FOR 2010
AT THE HIGH END OF 11% TO 15% RANGE
Visa affirmed net revenue growth for 2010 at the high end of the 11 percent to 15 percent range. The company will “significantly” beat its earlier stated estimate for annual free cash flow in excess of $2 billion for this year said Byron Pollitt, Visa’s finance chief.
Story by Aparajita Saha-Bubna for Dow Jones
MASTERCARD SEES 20% PROFIT GROWTH FOR 2010
MasterCard Inc. expects its net income to rise at least 20 percent this
year, helped by a small boost from foreign exchange and a modest decline in
expenses. The company also on Wednesday said it does not expect a serious
impact on revenue from a new law limiting merchant fees on debit card use,
and late Tuesday announced a new share buyback program. Long-term,
MasterCard Inc. said it’s aiming for revenue growth between 12 and 14
percent for 2011 to 2013, and earnings per share growth of 20 percent.