CARDS UNPLUGGED
From the August 2003 Issue of CardTrak
       The cashless society worked great until this month when someone pulled the plug on New York City, Toronto, Cleveland and Detroit. It's true that all of the nation's payment card networks performed flawlessly during the August 14-15 blackout, but only if you could access them. Finding an ATM with power was a challenge in some cities. New Yorkers learned they should go back to the days of carrying some "mugging" cash. Indeed, consumers with a wallet full of plastic and no green stuff were challenged to survive in the non-electric world. The scary thing is the whole scenario could happen again and elsewhere in the USA. Best advice -- stuff some mad money in your shoes and wallet.

Did the blackout affect spending? No doubt.

Credit card activity across Ontario dropped 29% on Friday, August 15 compared to the previous Friday. Most of the sectors that make up the retail category experienced an average 40% decline in dollar volume. However, within the retail category, gas stations and convenience stores increased 30%. Moneris Solutions Corporation also found that the services sector, which includes the health, financial, insurance and utilities industries experienced a 41% decline in total dollar volumes processed. Moneris estimates that spending across Ontario on Friday, August 15 was down CN$100.4 million compared to the previous Friday.

COLLEGE CARDS
A new survey has found that 70% of consumers believe debit cards are a better option for college students than credit cards. The research also found that seven out of ten Americans believe it is a bad idea for credit cards to be in the hands of college students. The survey of 1,200 Americans was conducted by the non-profit InCharge Institute of America which publishes the YOUNG MONEY magazine. According to a 2001 survey by Nellie Mae, a leading national provider of student loans, college students will double their credit card debt and triple the number of cards they have by the time they graduate. In 2001, 83 percent of college students had at least one card, and their average balance was more than $2300.

BACK-TO-SCHOOL
VISA USA has added a"Back-to-School Budget Calculator" to its "Practical Money Skills" Web site. The calculator equips families with a smart budget by reminding families to consider all of their back-to-school expenses, and allows for any needed adjustments. In addition, parents and students will find helpful tips for a more educational back-to-school shopping experience. "Practical Money Skills for Life" is an online curriculum sponsored by VISA and is free to consumers. It features lesson plans, interactive calculators, and activities for parents, teachers, students, and consumers of all ages. For more information visit www.practicalmoneyskills.com.

FEE REFUNDS
Oregon-based First Consumers National Bank, part of The Spiegel Group, has been ordered by the Office of the Comptroller of the Currency to refund $1.65 million in annual fees charged to VISA and MasterCard customers whose cards were about to be terminated under a recent portfolio liquidation. The OCC says that FCNB knew on December 28, 2002 that it would have to liquidate its credit card portfolio and it should have informed customers of that fact when they renewed or initiated their credit cards. The OCC says the Bank did not inform customers and continued to assess the annual fees even though the credit cards were about to be terminated. The formal agreement, announced this month, also directs the Bank to refund over-limit fees charged to customers who exceeded their credit limit as a result of the annual fee charge. The amount of those refunds is approximately $255,685. Most of the customers were reimbursed by the Bank by June before the Bank transferred the servicing of its credit cards to First National Bank of Omaha.

ONLINE GAMBLING
A California couple has filed a lawsuit against VISA, MasterCard, Discover, and the banks that issued their credit cards, over losses they sustained by gambling online. Lisa and Andrew Harding filed the lawsuit in Alameda County in response to a lawsuit filed against them by Retailers National Bank. The Hardings claim they lost more than $100,000 gambling online with their credit cards. The lawsuit charges the card networks and the issuers with violating the California "Unfair Business Practices Act" and a California prohibition against providing credit for gambling, as well as violating the USA Patriot Act. VISA and MasterCard have rules to enable member banks to prevent the use of their cards in connection with Internet gambling transactions. The rules require that, in order for a merchant to seek payment authorization in connection with an Internet gambling transaction, the merchant must code the authorization request to indicate that the transaction is an Internet gambling transaction. Merchants who will not abide by these rules are not permitted to accept cards.

MINI VISA
More than 15 million "VISA Mini Cards" have been produced and issued by IL-based Versatile Card Technology since the launch of the card in October. Bank of America's "Mini VISA" is about half the size of a regular credit or debit card and can be attached to a key chain. The card can only be used with swipe terminals, not ATMs. BofA has exclusive rights to issuing the mini card for a one-year period. Following the first year, under a license from Bank of America, VISA member banks will be permitted to issue VISA-branded mini cards, for which Bank of America will receive royalty payments. The "Mini VISA" is a response to the successful launch in March 2002 of the Discover "2GO Card," a small, oval shaped credit card, in a protective case, that attaches to a key chain, belt, or money clip. Discover has not released data on the number of "2GO Cards" issued. Versatile Card Technology is a certified manufacturer of VISA cards with facilities located in Turkey, Germany, Mexico, Singapore, South America and India.

MASTERCARD MID-YEAR
MasterCard's U.S. credit card portfolio added 3.4 million accounts and 4.4 million cards during the second quarter, while its U.S. off-line debit card accounts and cards were flat compared with the first quarter. Second quarter gross dollar volume, which includes purchases and cash advances, for credit cards and debit cards, rose 3.1% and 8.1%, respectively, compared to 2Q/02. Overall, MasterCard's second quarter U.S. gross dollar volume increased 4.1% over the same year-ago period, as purchase volume increased 8.8% and cash advance volume declined 8.8%. Compared to the second quarter of 2002, MasterCard's credit card account base grew 6.5% and its off-line debit card account base increased 19.7%.

PAYROLL VACATIONS
You can now pay for a vacation via a payroll deduction card. Pennsylvania-based E-Duction and Vacation Express have signed an agreement to enable cardholders of E-Duction's "CLEAR MasterCard" to purchase Vacation Express' tour packages interest-free over a six-month period, with payments automatically deducted from their paychecks. For example, a "CLEAR" cardholder who purchases a $600 vacation package from Vacation Express, assuming bi-weekly pay, will be charged only $47 for the next 13 paychecks. "CLEAR" is an employee program that allows employees to make purchases at over 29 million MasterCard acceptance locations worldwide and spread payments out over future paychecks. Vacation Express is an Atlanta based tour operator that sends close to 200,000 passengers a year to Mexico and the Caribbean.

ONLINE RESPONSE
NY-based Change Sciences Group released a report this month showing that more than nine million U.S. consumers applied for credit cards online during 2002. The company says that recent forecasts indicate that more than 50% of all credit cards will be obtained exclusively through an online channel in the next year. The top five credit card Web sites, based on ease of use, according to Change Sciences Group are Discover, National City, Chase, Fleet, and Bank of America. Change Sciences uses a benchmarking process which allows for the empirical comparison of Web sites across more than 30 usability metrics.