The consolidation in the bank credit card industry has now placed more than 77% of the market into the hands of the top ten players. According to year-end 1999 statistics gathered by CardData, the top ten issuers now hold $372 billion in card loans spread over 262 million accounts. During 1999 American consumers charged about $1.2 trillion on their general purpose credit cards. Nearly 70% of those charges were made on plastic issued by the top ten issuers. The fastest growing top ten issuer last year was Providian with a 60%+ increase in card loans. American Express also posted a hefty increase in card loans as the company continues to expand its credit card offerings with Optima and Blue.

                 

THE  TOP  TEN  U.S.  ISSUERS  FOR  1999
Rank/Issuer	Card Loans	Accounts	Sales Volume
1. Citibank	$74.2b	40.6m	$162.3b
2. Bank One/First	$69.4b	43.1m	$142.7b
3. MBNA	$63.1b	28.9m	$102.8b
4. Discover	$38.0b	38.5m	$ 70.6b
5. Chase Manhattan	$33.6b	20.5m	$ 53.8b
6. American Express	$23.4b	23.5m	$186.4b
7. Bank of America	$20.9 b	21.0m	$ 50.3b
8. Providian	$18.7 b	15.2m	$ 20.3b
9. Capital One	$16.4 b	22.0m	$ 32.6b
10. Fleet	$14.3 b	8.5m	$ 17.0b
b-billions      m-millions
Source: CardData (www.carddata.com)

RATE  CHANGES

Bank One/First USA has quietly phased out its 9.99% APR, no-annual-fee offerings and has replaced the offers with a Prime +4.99% rate with no-annual-fee. The rate adjustments are in response to recent earnings problems at Bank One's First USA credit card division. The issuer engaged in blistering competition last year which led to irrational pricing which in turn led to reduced profits. Given the size of the Bank One/First USA portfolio it is possible other issuers may follow. So far, Fleet Boston is the only issuer that has hiked rates. Fleet was offering one of the lowest rates in the nation, a fixed 7.99% APR. This month Fleet moved the rate for its Titanium MasterCard from 7.99% to 8.99%. Fleet made adjustments with other card products as well.

Meanwhile competition among other issuers continues to be intense. American Express, Citibank, Capital One, and Providian are now offering short-term introductory rates of 0%. Chase Manhattan is running national ads this month for a new Prime Rate card. Chase is offering the Prime +0% card with an annual fee of $49. The new card is only available via telephone applications. (Call 1-800-619-2104 for details.) The Chase Prime Rate card competes with Wachovia's Prime For Life card which offers Prime +0% for an $88 annual fee.

PLATINUM  GLITTER

The American Express Platinum card has taken a real beating over the past three years with the flood of VISA and MasterCard Platinum cards. This month, in an effort to put more shine into its Platinum card, American Express has teamed up with Lexus to offer a free American Express Platinum card to new Lexus owners. Lexus launched the special promotion this month that will feature a Platinum Series of its four luxury sedans. The new Platinum Lexus will include special paint, upgraded leathers and other amenities. Part of the package is the American Express Platinum card with two year waiver on the annual fee. AmEx normally charges a $300 annual fee for the card. Lexus purchasers who fail to qualify for the AmEx card will be awarded AmEx gift certificates. AmEx indicated that most Lexus owners already have an American Express card product and the Platinum card would be considered an upgrade. The Lexus Platinum Series promotion will end in July. During July, Lexus will unveil its all-new IS 300 compact sport sedan which offers entry prices to younger buyers.

GOLD  TARNISH

Gold cards continue to lose their luster as credit limits sink. Capital One has introduced this month a sub-prime VISA Gold card with credit limits between $200 and $1,000. Capital One is currently running a pre-selected direct mail campaign for the new card. The Capital One VISA Gold carries no-annual-fee and 19.8% APR. To sweeten the offer, Capital One is offering applicants a choice of a one year subscription to either Entertainment Weekly or Sports Illustrated. Cap One is making the free subscriptions offer on other card products including its Designer VISA series. Since VISA and MasterCard have relaxed the minimum $5,000 credit limit of gold cards, several issuers have introduced low credit limit VISA and MasterCard gold cards. Some major issuers have dropped gold products entirely, replacing them with the platinum card.

TITANIUM   WARS

  With gold cards heading downscale and platinum cards becoming commonplace, the Titanium battle has drawn a few major players. MBNA has now entered the latest marketing war with a no-annual-fee Titanium MasterCard featuring a 2.9% intro rate and a 13.99% go-to rate. MBNA Titanium cardholders also get online access to account information and access to Palladian Travel Services. Fleet also introduced a Titanium MasterCard with a fixed 9.99% APR. However Fleet has since adjusted the rate down to 7.99% then up to 8.99%. Fleet is offering instant online approvals for the product. Meanwhile the pioneer of Titanium cards, First USA, may be toning down its offerings. Last summer, First USA offered a 1.9% fixed intro rate on its Titanium VISA card with a go-to rate of Prime +3.9%. However Bank One and First USA have been re-pricing card offers, switching from a fixed 9.99% APR to a Prime +4.99% rate. 

    IRS  MILES

This year American taxpayers can officially charge their federal income taxes to their MasterCard, American Express, or Discover card. (VISA is not participating in the program.) There is a service charge of 2.5% to 3.0% to charge taxes. This service charge represents the typical fee a merchant would pay to take a credit card. However federal law prohibits the IRS from absorbing this fee. Therefore the merchant fee is essentially passed on to the consumer via the service charges.

The big question is: Is it worth it to charge taxes to a credit card offering rewards? Most reward programs connected with credit cards give back about 1.0% to 2.00% of the charge in form of cash, rebates, air miles, etc. If you charge $10,000 of taxes to the Discover card, you'll earn a cash-back reward of $85. If you charge $10,000 to the GE Rewards MasterCard, you'll earn a cash rebate of $135. Hardly a deal when you consider the service fee to charge $10,000 in taxes is $262. However if you charge $10,000 to the GM MasterCard you earn a $500 credit towards the purchase or lease of a new General Motors car or truck. Now that's a better deal. An even better deal is air miles.

Most air miles have a value of 2.0 cents per mile and it generally takes 25,000 air miles to get a free domestic ticket. So if you charge $25,000 in taxes the service charge is $699 and you'll earn enough miles for a free domestic ticket. But when you add the annual fee typically charged for an airline credit card program, the savings are not worth it. You end up paying around $800 for a free domestic ticket that is worth about $500 to $700.

But if you use air miles to upgrade, especially on international flights, then the savings can be extraordinary. For example, the CEO of CardWeb.com regularly travels to the London office. He typically pays $900 to $1000 for a round-trip coach seat from Washington, DC to London on United Airlines. He then upgrades the seat to business class for 20,000 air miles. A business class seat on these flights costs between $5300 and $6300. Therefore the 20,000 miles saved $4300 to $5300. Charging $20,000 in taxes would require a fee of $525. Therefore spending $525 to save four or five grand is worthwhile.

The reality is that CardWeb.com's CEO gets a far higher value out of air miles. Since he paid for the coach seat, he earns 7,500 miles for the flight. He is also a United Premier Executive flyer so he actually earns double miles or 15,000 miles for the London flight. The end result is that he paid about $1,000 and 5,000 miles for a business class seat worth more than $5,000. So there are scenarios in which charging taxes makes sense, a lot of cents!