Credit card interest rates have passed the 30% barrier! Direct Merchants Bank is now charging some cardholders an annual interest rate of 31.99%. This month Direct Merchants is marketing a Gold MasterCard that carries no-annual-fee and a Prime +14.99% APR. Since the Prime Rate is currently 9%, the regular APR for the Direct Merchants Gold MasterCard is 23.99%. However if you make two late payments in a six-month period your interest will automatically bump up to 27.99% (Prime +18.99%). Make three late payments within a six-month period, or be more than 60 days past due, and your interest rate will jump to a whopping 31.99% (Prime +22.99%). The 27.99% and 31.99% APRs charged by Direct Merchants are known in the industry as punitive interest rates. Most issuers charge these higher rates to cardholders who make a late payment, go over the credit limit, or commit some other infraction of the Cardholder Agreement. A few issuers such as Discover and Capital One, regularly review credit bureau records to see if there has been any change in a cardholder's creditworthiness. If a cardholder has missed other loans payments, or signed up for too much credit, then a punitive interest rate may be applied to the account. Among the top bank credit card issuers punitive rates: Citibank: 23.99%; Discover:  22.99%; Chase: 24.99%; American Express Optima:  23.99%; Bank of America:  23.90%; Capital One:  24.99%+; Fleet:  25.60%; and Household:  24.40%. Associates charges punitive rates in excess of 29%.

CARDWATCH

Despite the rise in general interest rates, promotional credit card rates this year have headed south. According to CardWeb's CardWatch service, the most common credit card teaser rate for April 1999 was 3.9%. This year, most of the nation's top issuers have switched to a 2.9% intro rate. Making them even a better deal is the fact that most run for six months or longer. But watch out! Some issuers such as Citibank and Chase are instituting balance transfer fees. Bank One/First USA has been charging a 3% balance transfer fee for the past year. Nearly all the April 2000 promo rates apply to balance transfers only.

APRIL 2000  PROMO  RATES
(all intro rates apply to balance transfers only unless otherwise noted)
Issuer	APR	EXPIRES
Citibank	1.9%	Jan 2001
First USA/GE	2.9%*	Nov 2000
MBNA	2.9%*	Aug 2000
Discover	2.9%	Sept 2000
Fleet	2.99%*	Oct 2000
* FUSA/GE rate also applies to purchases, however a 3% fee applies to all balance transfers; MBNA's rate also applies to purchases and cash advances; Fleet's rate requires a balance transfer and applies to purchases; Source: CardWatch (www.cardwatch.com)

BANKRUPTCY  REFORM  UPDATE

It looks like bankruptcy reform legislation is bogging down. The Senate version of the bankruptcy reform bill is running into stiff opposition over a provision that enables creditors to access retirement assets. The manager's amendment, sponsored by Senator Charles Grassley (R-Iowa), enables credit card issuers to insert waivers into cardholder agreements to lift protections of pension plans not covered by ERISA, in the event the cardholder files bankruptcy. The provision does not affect 401K plans or other plans covered by ERISA. However IRA and Roth IRAs could be affected. While the amendment was passed last fall without objection, bi-partisan opposition began to build last month. Sen. James Jeffords (R-Vermont) and Sen. Edward Kennedy (D-Massachusetts) have joined the chorus of opposition. Grassley says the intent of the provision is to prevent wealthy debtors from evading creditors by shifting assets into retirement accounts. However Jeffords said he is concerned that credit cardholders will unknowingly sign away their pensions when applying for a credit card. Meanwhile the number of personal bankruptcy filings are decreasing. However a new research study has found that there is really a shift in filings taking place not an actual decline. NJ-based Smith Business Solutions says its analysis shows there are a number of urban counties where filings are either increasing or declining only modestly. Smith also says filings are on the rise in some rural counties, especially those where the bankruptcy rate has been traditionally lower than the national average. While the number of personal bankruptcies declined by 8.5% during 1999, there were 1,049 counties that experienced an absolute increase in the number of filings. Nearly 900 of these counties were rural. When indexed, 57% of the counties measured in the study saw an increase in their filings rate in relation to the national average.

ADVANCE  FEE  CARDS

An Arlington, TX firm settled this month with the Federal Trade Commission for misrepresenting a credit card offering involving an advance fee. The FTC charged Modern Credit Financial Services, Inc. with violating the FTC Act and the Telemarketing Sales Rule. Under terms of the settlement the principals of Modern Credit have agreed to post $500,000 performance bonds before engaging in the credit card business again, pay $15,000 for redress, return more than $5,800 in uncashed checks to consumers, and relinquish any claim to an additional $12,000 owed to the firm by TeleCheck Services. The complaint alleged that the defendants, through cable TV ads and telemarketing, promised consumers advance fee credit cards for $89, payable through a bank draft from their checking accounts. According to the FTC, few, if any, consumers received the promised credit card or a refund.

PTAD

While concerns over credit card security on the Internet continue, a new study suggests another consumer problem is sweeping retail e-commerce. "Post Transaction Anxiety Disorder" is now an Internet problem according to research conducted by CA-based Shelley Taylor & Associates.  Taylor says the symptoms of PTAD are shipping charges sticker shock and anxiety about whether items ordered online will actually arrive. The survey revealed that only 36% of sites indicate whether products are actually available before the customer has submitted his or her credit card; 38% of sites fail to provide shipping options; and only 16% of sites provide access to return policies on the check-out path. The analysis of 100 consumer e-commerce sites also found that less than half of online receipts inform the customer of the total charges that will be charged against the credit card; only 57% of sites provide live online order tracking; and only 7% of companies provide a link to order status on their homepages. Taylor noted that only 48% of items ordered by the research firm during the study arrived when expected.  The "Return to Sender" report found 30% of online stores provide free shipping; however, of those that don't, the average shipping charge amounted to 37% of the total cost of the order in the US and 20% in the UK (with a 2-3 day shipping option on products that averaged $25 in the US and (pound)20 in the UK).

ONLINE  MARKETING

Online credit card seekers are both more ethnically diverse and more receptive to online branding than the general online population. Cyber Dialogue says it also found that online credit card seekers are also younger, primarily male, and more likely to carry larger balances than other segments such as online traders.  Already, 9.8 million Americans have shopped for credit cards through the Internet and nearly half of them, or 4.3 million have applied for a credit card directly online. Cyber Dialogue discovered that online credit card applicants also have a particularly high conversion rate, as more than half of those who applied on the Web, or 2.2 million, ultimately acquired and began actively using the credit card they obtained online. The survey also showed that 35% of online credit card seekers are in the ethnic minority, in comparison to 20% of the general online adult population. Participants indicated they are especially concerned about low interest rates and the reputation of the credit card company: 90% of online credit card seekers list low interest rates as an important feature of a card and 83% list a trusted institution. Cyber Dialogue says the general online population is a third less likely to cite these two factors as important to their choice of a credit card issuer. Other recent surveys indicate that per-account acquisition costs for online accounts average around $40 compared to nearly $80 for direct mail generated accounts.

COSTCO  CARDS

Amex Bank of Canada and Costco Wholesale announced a marketing partnership to launch of two co-branded cards for Costco members. The introduction of these cards marks the second phase of the relationship between the companies that started last November, when American Express became the only general-purpose credit card accepted at Costco's 59 locations across Canada. The new cards, one for consumers and the other for small businesses, double as the Costco membership card. The AmEx/Costco Canada consumer card features no-annual-fee, a 6-month 9.9% APR, and up to a 2% cash rebate. The small business card requires a $59 annual fee and offers automatic discounts from 10%-45% off business purchases with Delta Hotels, FedEx, Hertz, IBM and McGraw-Hill Ryerson and a disability plan for small business. In the USA. American Express and Costco began issuing co-branded cards in November.

BOOTS  &  EGG

Prudential Banking's UK credit card, Egg, and Boots The Chemists announced a co-branding relationship this month. The deal will combine the Boots Advantage loyalty card with the Egg credit card. The Boots Advantage Card was launched in Sept. 1997 using smart card technology and offering a 4p for the pound benefit to cardholders. There are now 12 million card holders of which 8.5 million are regular users. New applications are running at a rate of 40,000 each week. Egg was launched in Oct. 1998 by Prudential's UK banking subsidiary, Prudential Banking plc. In its 18 months since launch, it has built up a customer base of some 900,000. In Sept. 1999 Egg launched a credit card and since signed up 250,000 cardholders. Key features of the new co-branded credit card will include: More points as purchases in Boots stores earn four points plus one additional point per pound spent; one point per pound earned on all other transactions using the card; extra one point per pound earned on transactions within the Egg Shopping Zone; and an APR of 10.9% for Internet users,14.9% for other users. Cardholders will collect the points they have earned through the Advantage Point Kiosks in Boots stores. Access to monthly statements for on-line users will be through the Boots internet site.

WEBMILES  MASTERCARD

Metris Companies has signed an agreement with UT-based WebMiles to offer the WebMiles MasterCard. The card features a global, unrestricted mileage reward program. The WebMiles MasterCard rewards customers with 1 mile for every dollar spent on the card. When the new card is used to make purchases at participating online and offline Webmiles merchant partners, consumers will earn miles on both the card and through the merchant partner. The WebMiles program allows consumers to earn free travel on all airlines with no blackout dates or seat restrictions. The miles earned from the WebMiles MasterCard and WebMiles Partner Network are combined and tracked into a single miles account. Metris said this morning it will launch the WebMiles MasterCard in June and will disclose the card's pricing at that time.

ESSO  VISA

  Canada's Royal Bank and Imperial Oil unveiled the Royal Bank Esso VISA card this month. Currently Esso personal cardholders earn one point for every eligible dollar spent at participating Esso stations. Under the new VISA program, cardholders will collect two or more points for every dollar spent on eligible purchases at participating Esso stations, plus one point for every dollar spent on all other purchases. Points for gas rewards are redeemed online or via a toll-free number. Imperial Oil also announced the expansion of the WIN & EARN loyalty program, whereby Esso customers can redeem Esso Extra points for $5, $10 or $20 worth of free gasoline rewards.  This is in addition to a variety of other rewards, including car washes, movie passes and other items from Esso convenience stores.  Beginning May 1, thru Dec. 31 Esso customers can get $5 of free gas rewards for 1,000 points; $10 in free gas for 1,800 points; and $20 in free gas by redeeming 3,500 Esso Extra points.

FUNNY-MONEY

Sherman Oaks, CA-based FunnyMoney.com, an Internet loyalty-incentive direct marketing program for teenagers, opened for business this month. Under the program, members, for example, can purchase a pair of Nikes, at a discount, at the Shop & Earn section of the FunnyMoney.com site and then earn 25 Funny Money for each dollar spent. The members can then turn around and use the Funny Money to buy a new basketball to go with the shoes at any online retailer that takes MasterCard. The firm is targeting 13-24 year olds.

COBALT  CARD

The battle to build a payment system for teenagers picked up yet another competitor this month. San Francisco-based Cobaltcard said its has raised another $16 million in funding. Cobaltcard joins the battle to face other players such as RocketCash, Cybermoola, PocketCard, and CardEx iCard. The free Cobaltcard requires a social security number, driver's license or State ID and a bank account to register. Once members receive their Cobaltcard account number and transfer funds online from their bank account into their secure Cobaltcard, they can make immediate online purchases. For persons 15 years and younger, parental approval is required.

LOVE  FEST

  The love fest with prepaid and loyalty cards continues in the US. Standard Register's second National Consumer Survey of Plastic Card Usage found that more consumers are using prepaid and loyalty cards, while the use of other cards remains virtually unchanged. The research found the following percentages of adults use: credit cards, 88%; ATM cards, 60%; membership cards, 58%; debit cards, 35%; prepaid cards, 35%; loyalty cards, 29%; prepaid phone cards, 28%; gift cards, 11%; and smart cards, 4%.