Americans apparently believe that VISA and MasterCard do not compete against
each other and are divided over whether or not the credit card industry is
intensely competitive. According to a online poll launched last month by
CardWeb.com, most Americans would overwhelmingly choose VISA over any other
card and most believe it does not make any difference whether or not an AmEx
card was issued by a bank. The data are based on responses by nearly 500
visitors. CardWeb.com averages between 10,000 and 15,000 visitors per day with
about 80% of the traffic coming from consumers. Robert B. McKinley, CEO of
CardWeb.com, Inc. says the low response is indicative of the public yawn over
the VISA/MasterCard antitrust trial. The perception among consumers is this is
a big guy fight with little to offer consumers.
CardWeb.com's Online Poll - Government's Credit Card Lawsuit
1. In your opinion, is the credit card industry intensely competitive? 48% YES
46% NO
2. Do you believe VISA and MasterCard compete against each other? 62% NO 32%
YES
3. If you had to choose between a VISA credit card and MasterCard credit card
then which one would you choose? 44% VISA 17% MC
4. Would it make any difference if you could obtain an American Express or
Discover credit card from a bank rather than directly from American Express or
Discover? 48% NO 38% YES
5. If your bank offered you the same interest rate, annual fee and benefits on
a VISA, MasterCard. Discover and American Express card, which one would you
choose? VISA 33% MC 13% DIS 10% AMEX 22% (note: balance of responses to
each question were "unsure" Source: CardWeb.com, Inc.)
FEE INCOME
The fee income component of the bank credit card revenue stream continues to
grow on a percentage basis. According to new data released by CA-based R.K.
Hammer, fee income now represents 25% of total bank credit card income.
CardData (www.carddata.com) also released new
figures
this month that shows interest income topped $21 billion last year.
| FEE INCOME/TOTAL INCOME (Bank Total vs. Credit Card) |
| 2000: | 48%/25% | 1997: | 38%/21% |
| 1999: | 45%/24% | 1996: | 36%/19% |
| 1998: | 1%/23% | 1995: | 35%/18% |
| Source: R.K. Hammer Investment Bankers |
| | CARD FEE | INCOME | | CARD INT | INCOME |
| 1999: | $21.4B | (+13.0%) | 1999: | $60.2B | (+4.0%) |
| 1998: | $18.9B | (+28.0%) | 1998: | $58.1B | (+9.4%) |
| 1997: | $14.8B | (+48.0%) | 1997: | $53.1B | (+1.5%) |
| 1996: | $10.0B | (+20.5%) | 1996: | $52.3B | (+23.9%) |
| 1995: | $ 8.3B | (+13.7%) | 1995: | $42.2B | (+21.3%) |
| Source: CardData (www.carddata.com) |
BANKRUPTCY DECLINE
The number of personal bankruptcy petitions filed in U.S. federal courts has
been dropping by an annual rate of 8.3%. According to CardData, the percentage
of chargeoffs involving bankruptcy has declined from 42.3% for May 1999 to
37.2% for May 2000. The Administrative Office of the U.S Courts recently
reported that personal bankruptcy filings have dropped from 1,378,071 for the
year ending 3-31-99 to 1,263,096 for the year ending 3/31/00. For the first
quarter 2000, there were 312,335 total bankruptcy filings compared to 330,784
for 1Q/99.
| BANKRUPTCY FILINGS BY CHAPTER |
| (for year ending March 31) |
| YEAR | CHAP 7 | CHAP 13 |
| 2000 | 908,802 | 381,568 |
| 1999 | 1,017,049 | 393,245 |
| 1998 | 1,007,213 | 404,749 |
| 1997 | 862,136 | 372,369 |
| 1996 | 665,310 | 300,901 |
| 1995 | 568,565 | 255,382 |
| Source: Administrative Office of the U.S. Courts |
PROVIDIAN SETTLEMENT
As expected Providian reached a final settlement agreement with the OCC, the
San Francisco District Attorney's office and the California Attorney General.
Under terms of the settlement, Providian agreed to change some of its credit
card business practices and to pay a one-time restitution of approximately
$300
million. Providian will also pay a $5.5 million civil fine to the San
Francisco
District Attorney's office. The settlement requires Providian to provide
customers with enhanced disclosures should it ever reintroduce any of several
discontinued products, product features and underwriting practices, including
its 'Guaranteed Savings Rate' and 'Real Check' programs, certain 'No Annual
Membership Fee' products, home equity loans and the use of income-to-debt
ratios in performance-based pricing. Under the 'GSR' program, Providian
offered
certain balance transfer customers an introductory rate for a period of time,
usually three months. After the introductory period, Providian offered the
customer a customized interest rate of 30-70 basis points below the weighted
average non-introductory rate the customer had been paying to other credit
card
providers on transferred balances. The settlement also requires Providian to
modify its sales process for its 'Credit Protection' product, by providing
consumers with a complete written description of product terms and conditions
before finalizing a sale, rather than providing materials during the
thirty-day
cancellation period after the sale. Under financial terms of the settlement,
Providian will make payments to customers for fees and interest charged on
certain products offered between June 15, 1995 and June 28, 2000. Providian
will also make payments to limited numbers of customers who incurred
over-limit
fees in using pre-printed cash advance checks or received inadvertent
performance-based rate increases as a result of systems limitations.
MY-POINTS MASTERCARD
MyPoints.com and NextCard this month unveiled the 'MyPoints MasterCard'. Under
the new program, MyPoints' eight million members will be able to earn extra
reward points. MyPoints members basically earn points for a wide variety of
online and offline activities including reading and responding to targeted
email and Web-based offers, visiting Web sites, shopping, dining out and other
everyday transactions. Members will now be able to earn one additional point
for each dollar spent by using their 'MyPoints MasterCard' to make their
purchases. MyPoints.com is the Internet's fifth most popular shopping site
according to Media Metrix.
OFFER ZONE
American Express introduced 'Offer Zone' this month. The new online
destination
provides AmEx cardholders and small business cardholders with access to
hundreds of national online and local offline values. The offers will range
from free shipping and handling and savings of up to 20%, to gifts with
purchase and bonus 'Membership Rewards' points. Participating merchants
include
Barnes & Noble, Dell, FTD, Gap, OfficeDepot, and priceline.com. 'Offer Zone'
also integrates 'Gold Card Events' and 'Platinum Card By Invitation Only'.
HOLIDAY VOLUME
VISA reported this month that its U.S. cardholders spent about $1 billion on
travel-related products and services over the July 4th holiday weekend. VISA
says this represents a 10% increase over last year. For the study, VISA
compiled a list of 15 merchant categories as a proxy for travel-related
spending. The analysis was the first time that VISA has monitored such
spending. Among the findings was that gasoline consumption, on a dollar volume
basis, rose significantly, reflecting the rise in gas prices. VISA spending at
automated gas pumps nationwide rose 48% to $20.7 million, versus $13.9 million
last year. There was also a surge in spending at tourist attractions across
the country, as U.S. consumers spent some $8.2 million dollars, increasing 72%
over spending in 1999. VISA dollar volume at campsites jumped 14% to $6.4 million,
versus $5.6 million last year. Amusement parks across the country saw a lot of
traffic, with $16.3 million in VISA dollar volume, up 34% from last year.
Public golf courses experienced a 28% increase as golfers spent $25 million on
their VISA cards. Fast-food restaurants showed steady growth with an increase
of 13%. Surprisingly, car rentals were down this year compared to the same
4-day holiday weekend last year. VISA cardholders in the U.S. spent $100.7
million this year, down 17% from last year.
BMW VISA
BMW Financial Services announced this month the launch of two 'BMW VISA'
credit
cards. The new cards will be offered through the BMW Bank of North America, an
Industrial Loan Corp. in the state of Utah. BMW will offer two VISA credit
cards: the 'BMW Ultimate Card' and the 'BMW Card'. The 'BMW Ultimate Card', a
'VISA Signature' card, awards points with every purchase that can be redeemed
for rewards designed specifically for BMW drivers such as rebates on future
vehicle loans or leases, additional miles on a vehicle lease, or a variety of
BMW merchandise. 'Ultimate' cardholders receive an initial bonus of 5,000
points and then one point for each dollar charged thereafter. Cardholders can
earn a maximum of 10,000 points in a single month, and no more than 100,000
points in a one year period. Unredeemed points expire after three years. The
'Ultimate BMW/VISA Signature' card carries a $100 annual fee and a Prime +9%
APR. The 'BMW Card', a 'VISA Platinum' card, has no annual fee and a Prime +7%
APR. The 'BMW/VISA Platinum' card does not offer the same rewards program as
the 'Ultimate' version but does offer a points program redeemable for free BMW
merchandise. BMW estimates there are 1.5 million BMW drivers in the USA. BMW
Financial Services was established in 1993 and finances over half of the BMW's
sold or leased in the USA.
