Weekly Credit Card Update September 23
VISA & MASTERCARD MAY HIKE DEBIT CARD COSTS
The price of small purchases on debit cards could soon rise sharply–for merchants, that is. Visa and MasterCard are reportedly planning to dramatically raise the fee charged to merchants for small ticket items,
according to Janney Capital Markets analyst Thomas McCrohan. Today, a merchant pays about 8 cents to the card networks to process the purchase of a $2 cup of coffee, but McCrohan said the two companies are planning to spike that to 23 cents. That will “kill the economics for small ticket debit purchases and influence a shift back to credit cards,” he wrote in a note to clients. The fees that merchants pay for credit card
transactions were not addressed in a new regulation limiting debit card fees to roughly 24 cents per transaction, regardless of the total price of the purchase. The new rule takes effect Oct. 1.
Story by the Associated Press
CITI TO RAISE MONTHLY FEES ON CHECKING ACCOUNTS
Citi is raising the monthly fee on its basic checking account. The new fee will be $10, up from the previous $8. At the same time, the bank said Friday that it will waive fees and offer bigger rewards if customers sign up for more services. The changes reflect a broader industry push to deepen relationships with customers and capture more of their business. For example, Citi also said it will no longer give rewards points for debit card purchases. But customers will be able to earn more points each month by opening a Citi savings account or setting up a feature that automatically transfers money into a savings account. Customers will also be able to avoid the monthly fee if they maintain a balance of at least $1,500 or sign up for direct deposit and online bill pay.
Story by Candice Choi for the Associated Press
MONEY ISSUES OF SURVIVING SPOUSES
The death of a spouse is a wrenching event. To make the pain and anxiety worse, survivors find themselves grappling with financial and legal questions at a time when many people understandably aren’t thinking clearly. The immediate challenge is handling the logistical issues that crop up in the days and weeks that follow a spouse’s death–especially an unexpected one. At the same time, care needs to be taken to avoid making decisions or missteps that will prove complicated or perhaps impossible to undo years down the road. Before paying bills, it’s important to consult with an
attorney. Some debts, such as a legal judgment or credit cards in the name of the deceased only, may not have to be paid. Other debts will be paid out of the estate.
Story by Tom Lauricella for the Wall Street Journal
MOBILE WALLET MARKET HEATS UP WITH DEBUT OF GOOGLE WALLET
After years of speculation, mobile payments are finally a payment option for some smartphone users with this week’s debut of Google Wallet. Mobile phones provide daily conveniences for Americans, but flashing a phone at the register may not be any easier than swiping a credit card, and it may provide more risk to the consumer. Consumers won’t save money by paying
with a mobile phone. The same fees and interest rates for consumers and interchange fees for retailers will apply to mobile payments. Retailers are also reluctant to spend the money to buy the equipment necessary to link your cell phone to their cash registers. Google Wallet is the first mobile wallet entry, but it won’t be the last. At least three competing digital
wallets (from Visa, PayPal, and Isis-a joint venture of AT&T Mobility, T-Mobile, and Verizon Wireless) are planned for launch later this year and in 2012.
DEBIT OR CREDIT? CITI PLACES ITS BET
Making an aggressive push to rebuild a flagging business, Citigroup Inc. is stuffing America’s mailboxes with credit card solicitations. Citi mailed an estimated 346 million card offers to North American customers in the third quarter, according to figures to be released later this month by Mail Monitor. That is more than one for every man, woman and child in the U.S. The postal blitz is expected to make Citi the largest mailer of credit card offers, ahead of longtime industry leader Chase, for the first time in eight years. It shows how Citi is trying to regain ground ceded to rivals after losing hundreds of millions of dollars on credit cards following the 2008 financial crisis. Citi said it is being more selective in its marketing, focusing on well-to-do consumers instead of the broader swath of customers targeted in the past. But the solicitations won’t come cheap for Citi. A piece of direct mail can cost upward of 70 cents, including postage, putting Citi’s direct-mail expenditures at more than $240 million in the third quarter, analysts said. Overall card solicitations remain well off their highs of 2005. Response rates for direct mail have been falling, prompting issuers to turn to other avenues such as the Internet for acquiring new customers.
Story by Suzanne Kapner for the Wall Street Journal
COMMUNITY BANKS CALL FOR HALT ON BIG-BANK MERGERS
A trade group representing U.S. community banks called on Tuesday for a moratorium on mergers involving financial firms with more than $100 billion in assets. The Independent Community Bankers of America made its pitch to regulators at the first in a series of public hearings the Federal Reserve is holding to review Capital One Financial Corp’s proposed takeover of ING Groep NV’s U.S. online banking portfolio.
Story by Alexandra Alper for Reuters
BANK OF AMERICA STEERS BROKERAGE CLIENTS TO CREDIT CARDS FOR REWARDS
Bank of America is pushing some of its brokerage clients who want to keep their debit rewards to switch to credit cards following U.S. caps on debit card transaction fees. Customers who have the Visa signature rewards debit card linked to their brokerage accounts will no longer earn rewards points after November 15, according to a letter sent to clients last week. They’re invited to apply for a Visa signature credit card and earn a one-time bonus of 25,000 points if they make retail purchases totaling at least $1,000 by February 28. They’ll also get double points for purchases made within 90 days of creating the credit card account if opened by that date. Customers of Merrill Lynch Wealth Management who have earned rewards points on their Visa debit cards and open up credit cards will have those points automatically transferred to the credit cards, the letter said. If they don’t apply for the credit cards, they can redeem their rewards points by visiting card.ml.com by May 18. Rewards points that aren’t redeemed by May will expire.
Story by Dakin Campbell and Donal Griffin of Bloomberg Businessweek
VISA SEEKS GROWTH IN DEVELOPING COUNTRIES THROUGH FUNDAMO
Visa is going after the world’s developing regions to grow its payments processing business. Key to the San Francisco-based credit card company’s strategy is Fundamo, a South African-based company focused on mobile payments in emerging markets that Visa acquired in June for $110 million. Fundamo’s technology lets users send and receive money through software that resides on a feature phone or smartphone. So far, Fundamo has been rolled out to 34 developing countries, up from 27 in June. Although the market is in its infancy, a spokesman said payment volume growth is “spectacular” and that it maintains 30% to 50% market share in the countries it does business in. Visa acknowledges the U.S. market is different but says in many developed countries, mobile payments can still fulfill an important need to get money from one person to another.