CARD DEBT
From the April 2004 Issue of CardTrak®
The average revolving balance, among individuals with at least one credit card, is now $3,815, with households in the $75,000 to $100,000 income bracket carrying the heaviest load of nearly of $8,000 per person. A new consumer survey also found that 21% of adult Americans are uncarded, as approximately 50% of those earning less than $20,000 annually carry no store or bank credit cards. The new Gallup Poll of 1,000 consumers conducted in early April revealed that among Americans who have credit cards, the average number they own is 3.6, about the same as what Gallup measured in April 2001 and April 2002. The poll, which measured individual debt against household income, did not determine total household card debt, which would reflect credit cards not mutually carried by members of the same household. Notwithstanding, the poll confirmed much of the data reported by card issuers. For example, Gallup found that 60% of Americans revolve balances, and that the number of convenience users who "always pay-off in-full" has declined over the past three years from 42% to 37%. Gallup also found that although the absolute amount of the debt increases with income, the debt as a percentage of household income actually declines from double digits to single digits among people earning more than $40,000 a year. The overall percentage among credit card holders is 8.0%, but it is over 10% among people earning less than $40,000 a year, and much smaller among people with higher incomes. The poll organization also found that typically, the higher the amount owed, the higher the interest rates consumers are paying to the credit card companies.




A new financial literacy poll shows consumers are not generally honest when describing their use of credit cards and other loans. The study for Bankrate by RoperASW found that 75% of credit card users report that they do not make any major purchases on credit when they know they won't be able to pay it off immediately; 69% claim they don't put any charges on their credit cards unless they can pay off the bill right away. And 58% maintain they usually pay in-full each month. All of the figures contradict industry stats and other polls. Bankrate found that credit card usage was most widespread in the Northeast: 76% of those living in the Northeast have a credit card versus 63% in the Midwest and 59% in the South and West. Midwesterners were more likely than those in other parts of the country to pay their credit cards in full each month (68% versus 52% in the Northeast and 54% in the South). Interestingly, Bankrate found that Republicans are bigger users of credit than others and admit to having maxed-out on a credit card more often than Democrats. Democrats consider looking for and switching to credit cards with lower rates more important than Republicans do.




Experian Consumer Direct this month reported that consumers in only 10 U.S. cities have above average scores. Minneapolis topped the list at 707, followed by Boston at 705, and Washington, DC at 693. The average credit score for the U.S. is 678, according to Experian. The credit scores were compiled from the "Experian National Score Index," which is based upon a nationwide sampling of three million consumer profiles. The Index is formulated using Experian's consumer credit score model, called the "PLUS Score."









American seniors have embraced signature debit cards, using such cards more than ten times per month for a total monthly spend of about $450. VISA this month reported that grocery stores rank as the most preferred "VISA Check Card" category among consumers over the age of 55, followed by discount stores and gasoline stations. Last year VISA reported that debit represented 41% of its volume, and 59% of total VISA transactions. Last year Americans used VISA- and MasterCard-branded debit cards for more than $576 billion in purchases and cash advances, a 16% increase over the previous year. VISA's signature debit card volume last year of $454 billion, represented nearly 79% of the market.







Discover has launched a new promotion offering up to 10% back on grocery purchases. Under the promotion, cardholders receive a cash award of up to 1% of each purchase based on annual level and type of purchases, plus those enrolled in the special offer receive an additional 4% of each purchase made at qualifying grocery stores. Cardholders can then exchange their cash award of up to 5% for up to double the amount in certificates from Discover's "Cashback Bonus Partners." The offer runs from April 1st to June 30th. Cardholders have to enroll via Discover's Web site or a toll-free number.





The Taxi & Limousine Commission of New York City this month announced it plans to have credit card terminals installed in all 12,187 yellow cabs by November 2005. Fleet owners, or owner-operators, will have to pony up for the projected $1500 cost per cab to upgrade with credit card terminals. However, there has been no decision on how the merchant fees will be absorbed. A recent pilot program in New York City with credit card equipped-taxis has found that the majority of transactions are not successfully processed and those that do, take too long. The New York Times reported that a similar program in Chicago has not taken off. Chicago mandated taxicabs to have credit card equipment by 2002, but technological obstacles delayed the start-up. Chicago now expects all cabs to be equipped by June. Meanwhile, the NYC Taxi & Limousine Commission approved a 26% fare increase effective May 1st. The flat rate fare from Kennedy Airport to Manhattan will also increase from $35 to $45.




A new survey shows that while 63% of American adults are aware that the IRS accepts credit cards, only 1% plan to use a credit card to pay incremental Federal income taxes the next time they owe because of the convenience fees associated with the transaction. The study reveals that if the service were free, 34% of taxpayers would use it. NY-based Ipsos-Insight's Financial Services survey of 1,000 Americans found that a significant number of taxpayers would use this service if the fees charged to them were 1% or less. Ipos says if the IRS decides they want broader usage of this payment option, they will need to find a way to pay the card companies a processing fee.




A new study suggests that American Express is no longer the primary business card used by small businesses and middle market companies, but is gaining ground as the primary corporate card among micro-market businesses. The research of 2,800 companies found that VISA is the primary corporate expense card for 44% of businesses with annual revenues between $1 million and $20 million, and 45% of businesses with annual revenues between $20 million and $250 million. The Informa Research Services report says the base of micro market companies, with annual revenues below $1 million and that use expense cards, has grown from 21% in 2002, to 31% in 2003. During this period, American Express expanded its share from 14% to 27%, as MasterCard declined from 31% to 18%. VISA's micro market share increased from 51% to 54% in 2003. In the small business segment, American Express' primary relationships declined from 36% in 2002, to 23% in 2003. During this period, VISA's share grew from 40% to 44%, and MasterCard's increased from 24% to 32%. In the middle market segment, American Express' primary relationships declined from 50% in 2002, to 45% in 2003. During this period, VISA's share grew from 35% to 45%, and MasterCard's increased from 15% to 20%.







A new study has found that Capital One, American Express, and Discover provide the best overall online customer experience, while Fleet and MBNA customers are the least satisfied with their online experience. The research also found that one in four customers of Fleet, MBNA and Bank One experienced a problem finding or accessing customer support online. The findings are based on interviews with 2,000 credit card customers for the "Customer Experience Rankings for the Credit Card Industry" survey conducted by Vividence. The study shows that customers are motivated to transition to managing their accounts online primarily by the ease of paying their credit card bill and the ability to receive statements online. Customers are most likely to sign up for online services when applying for their card online. Vividence research also found that the ease of applying online, and Web site design and organization, were primary drivers in customer acquisition. Only the credit card offer itself (including annual fee and interest rate) had a stronger effect. American Express and Discover were the only sites to rate highly both among current and prospective customers-and although Capital One ranked last with prospective customers, the company ranked first among its own current customers. The Vividence study also looked at the reasons for increased card usage, finding that consumers use their credit cards primarily because of the convenience of doing so (49% mentioning as a factor); to earn travel and rewards points (29% mentioning); for purchase protection (25%); and to finance purchases (21%).







Direct mail volumes for credit card offers increased by 36% in February, compared to January, with an estimated 347 million offers sent out. Mail volume in the credit card sector has not been that high since October of 2002, when mail volume reached 366 million, according to MINTEL's Comperemedia. Of the top ten credit card mailers, nine of them increased mail in February compared to January. Comperemedia says for the past three months, 53% of all card offers came with a reward program, compared with 45% and 30% in 2003 and 2002, respectively. Cash back is by far the most popular reward with approximately 90% of reward cards offering cash back or a cash rebate.






Gift card dollar volume was about $45 billion last year, a 50% gain over 2002, and is now projected to hit $90 billion by 2007. However, a new report says potential regulation of gift card fees is not appropriate for bank-issued gift cards and could dampen growth. TowerGroup says that considering bank-issued gift cards have global acceptance and carry all the rights and protection afforded to credit cards, issuers should be permitted to add fees as needed. TowerGroup says that without charging fees to help support card benefits, institutions simply could not afford to offer the product. The report says that bank-issued gift cards are poised for the greater percentage growth over the next five years compared to retailer-issued cards. Several states have already moved to regulate gift card fees.




VISA USA and the Future Business Leaders of America-Phi Beta Lambda is recognizing teachers this month in the "Practical Money Skills for Life Educator Challenge." The Practical Money Skills for Life program offers consumers of all ages practical information and activities to enhance their money management skills. The Practical Money Skills for Life Educator Challenge will reward the winning teacher with a personal computer, $2,500 merchandise credit towards classroom supplies, and a mini-computer lab for his or her classroom. The Practical Money Skills for Life curriculum is teacher tested and teacher approved. Visa is the world's leading payment brand and largest consumer payment system, enabling banks to provide their consumer and merchant customers with a wide variety of payment alternatives.







The bank credit card industry's migration to universal default clauses, wherein cardholders who miss a payment with any creditor are considered in default of all credit agreements, is drawing more protest. This month, New York Assemblyman Peter Rivera (D-Bronx) has introduced a bill to make it a violation for a card issuer to raise an interest rate based on universal default. Rivera says the practice is anti-consumer and represents an intrusion into the private matters of the credit card holder. Rivera aides told Newsday that the practice is akin to being found guilty before the trial. At least two major new organizations are investigating the universal default practice.











The U.S. Supreme Court unanimously ruled this month that credit card over-limit fees are not finance charges. The decision overturned a U.S. appeals court ruling that card issuers must disclose over-limit fees as part of the finance charges. The case involved a class action lawsuit brought against Household Bank and MBNA which claimed that over-limit fees violated the Truth in Lending Act. The litigation did not consider whether over-limit fees were legitimate if the issuer authorized the excessive charges, or charged an over-limit fee when monthly finance charges push the account into an over-limit situation. Washington, DC-based Consumers for Responsible Credit Solutions responded that Congress should now pursue new regulations on creditor practices, examining whether credit card fee policies are abusive.