The latest trend in the fee frenzy enveloping the credit card industry is the marketing of fee-based services. Most top card issuers now offer travel club memberships, shopping club memberships, credit bureau monitoring services, credit/disability/life insurance, and air mileage options for a monthly or annual fee. Some of these services are very good for card issuers, but not so for cardholders. For example, most credit/disability/life insurance programs charge a monthly fee of 62 cents per $100 of balance. This means if you regularly carry a $5,000 balance you'll pay $372 per year for $5,000 worth of life insurance and, if you lose your job or health, a benefit that will make your minimum payments. No wonder these insurance programs produce a net profit margin of 54% for card issuers. However a few issuers have come up with a unique way to provide you with account protection in case you get sick, lose your job and die. It's called a debt suspension/cancellation program. It works very simple. You lose your job or health, your credit card account will be frozen . . . no more interest charges or payments due until your situation changes. If you die then the account balance is cancelled. Since there is no insurance company involved this program is even more lucrative for card issuers. Profit margins for debt suspension/cancellation programs approach 80%. Providian, Fleet and Capital One have offered such programs for years. However this year Citibank and Wells Fargo have jumped on the bandwagon and others are not far behind. The advice for consumers is to simply weigh the cost. In most cases you'll be better off getting financial protection directly from an insurance company rather than your credit card provider.
ONE CARD FLAP
MasterCard says businesses should have one payment card. VISA says companies should have multiple cards. VISA is releasing a study this month that cautions organizations to carefully weigh the many benefits and challenges of instituting a one card program in place of existing multiple commercial card programs. Last month MasterCard released a study which suggests businesses consolidate their various corporate card programs into an umbrella one card program to save time, money and generally improve the quality of management information and business process control. The contradictory recommendations come amidst a heating up of the business card market. The VISA U.S.A. study, conducted by AnswerThink Consulting Group and its Hackett Benchmarkingsolutions research arm, found that while one card programs have existed for a number of years, adoption of the product has been limited. Eight percent of the 196 respondents, from a variety of industries and company sizes, reported use of one card programs, while 36% were not interested in a one card program for their organization. Some of the obstacles for usage included administration, liability, transaction accounting and tax compliance. The MasterCard study, conducted by Deloitte & Touche, found that using a one card program enables centralization of processing and program management. Ninety-two percent of study participants with a one card program administer their programs centrally. Eighty-two percent of study participants report detection of non-compliance to policy is easier within a one card program.
BLACK & BLUE
The brutal competition among credit card issuers has left American Express black and blue. Last month American Express introduced its highest level of cardholder service via the new Centurion Card also to be known as the Black Card. Last month AmEx introduced the Blue Card which is a credit card with a computer chip imbedded. The super elite Centurion Card will cost $1,000 per year. The card is available by invitation-only to tenured American Express Platinum Card holders. The new card offers a wide range of premium services geared toward the well-heeled frequent traveler. For example Centurion cardholders qualify for free upgrades to the Concorde with the purchase of a full-fare first class transatlantic ticket on British Airways. Other benefits include complimentary upgrades on partner airlines and hotels, free access to some airline clubs, a personal travel concierge, personal shopper services and reduced fees for personal investment management. Centurion cardholders also receive a 50% Membership Rewards bonus on all charges made with 'Centurion' partners.
GOOD/BAD APPLES
More and more card issuers are jumping online and some into the instant approval business. But as always there are good apples and bad apples. Among the good apples are NextCard VISA, Wingspan VISA and Aria VISA. NextCard offers a free rewards program for cardholders carrying balances which enables cardholders to qualify for a free domestic airline ticket on any airline for charging as little as $11,500. (Most rewards program require cardholders to charge $25,000 to qualify for a free domestic ticket) Wingspan Platinum VISA offers 5% cash back for purchases made at 30 premier online merchants such as amazon.com, etoys.com, garden.com and sharperimage.com. Aria VISA Platinum Premium offers a 3 month 0% interest rate followed by fixed rates as low 7.99% (lowest in the industry). Among bad apples are Future Card VISA, First National Credit Card VISA and Global 1 MasterCard. The Future Card VISA issued by First Premier Bank charges $168 in program setup fees against a minimum $250 credit line and $5 per month thereafter. First National Credit Card VISA issued by First National Bank of Pierre, SD charges $169 in program setup fees and annual fees against a minimum $250 credit line plus $40 annually and $6 per month thereafter. This bank also charges up to $50 for increasing credit limit the first time. Global 1 VISA/MasterCard issued by First National Bank of Brookings, SD charges $348 in program setup fees against a minimum $375 credit line plus $5 per month afterward.
CONSUMER ADVICE FOR ONLINE CARDS 1. Know who you are dealing with. Never apply online for a VISA or MasterCard if there is no bank name mentioned. It may be a bogus offer with the real goal of capturing your personal data for fraudulent purposes.
2. Verify who you are dealing with. If a bank name is listed and you do not recognize it, then check to see if a phone number and physical address is listed. If none is listed, then be wary.
3. Is your application handled in a secure or encrypted mode? Does your browser support SSL encryption? Never send personal data to a website that is not equipped to offer a secure session or with a browser that does not offer encryption.
4. Always read the online disclosures. There are many hidden costs associated with credit cards today and there is a compelling need to review the terms and conditions carefully. If there is no disclosure of terms and conditions listed on the web site then proceed at your own risk.
5. Does the web site and card issuer have a privacy policy? How will your personal information be handled beyond the purposes of a credit application?
VIRTUAL CARD
Citibank launched its new virtual credit card that runs on the MasterCard network this month. Citibank's new ClickCredit is a separate line of credit to be used exclusively for online purchases. Citibank is offering two versions of the program Click Citi Platinum Select and Click Citi AAdvantage. While these lines of credit are not issued in the form of a credit card, they carry many credit card features such as cash back rewards, airline mileage rewards and purchase/protection guarantees. Click Citi Platinum Select members will receive 2% cash back on all Internet purchases made through May 31, 2000; thereafter they will earn 1% cash back. Click Citi AAdvantage members will earn two American Airlines AAdvantage miles for every dollar spent online, through May 31, 2000; thereafter they will earn one mile for every dollar spent. ClickCredit customers also receive Price Protection and Extended Warranty protections. Click Citi Platinum Select customers also receive Purchase Assurance. The Platinum Select version offers a 0% APR for three months followed by a Prime +1.65% APR. ClickCredit customers can monitor their spending and make payments online through features such as Account Online and CitiPay. Citibank's Account Online service enables its traditional credit card and ClickCredit customers to log on and manage their credit accounts. CitiPay allows customers to make payments over the phone or online by deducting them directly from any checking or savings account. Consumers can apply online for a Click Citi Platinum Select or Click Citi AAdvantage account. Customers will be issued ClickCredit cards which will include their account number; the cards are for reference only and are not used when actually making a purchase.
DIGITAL WALLETS
The smart money this year is in digital wallets! The dumb money is web shoppers who repeatedly fill out the same information for online orders. Digital wallets eliminate the tedious and repetitive task of completing online shopping order forms, passwords, login IDs and registration forms. Once your wallet is setup it becomes a piece of cake to go web shopping. NextCard, the pioneer of Internet credit cards, announced this month a partnership with Gator.com to offer a digital wallet to its cardholders called NextCard Concierge. NextCard says its cardholders are five times more likely to purchase online than other credit card users. According to Jupiter Communications, seven out of 10 Internet users abandon online forms and shopping carts before a sale is made because they find filling out the forms too exasperating. Furthermore, in a survey conducted by Gator.com, over 90 percent of the Internet users surveyed said that they regularly visit Web sites where registration and login are required. More than two-thirds of them found these obstacles to be a nuisance.
KINDLIER PROVIDIAN
Trying to further repair its bruised image with cardholders, Providian Financial recently announced it has rolled back its foreign currency transaction fee. Providian says it has reduced the fee from 5% to 3%. The fee includes the standard 1% fee charged by VISA and MasterCard for converting foreign transactions to U.S. dollars. Less than one year ago, a few major issuers began adding a 2% surcharge on foreign transactions over and above the standard 1% VISA/MasterCard fee. To date, Citibank, Bank One/First USA, and Chase Manhattan have added a 2% surcharge on foreign transactions. American Express doubled its foreign currency exchange fee this summer from 1% to 2%. Providian was the only issuer in the U.S. to add a 4% surcharge. According to CardTrak, most issuers do not add a processing fee to foreign transactions. Providian said it made the move to "enhance customer satisfaction".
SLAMMIN' CARD
Now you can slam down a MasterCard to show support for your favorite professional wrestler. The card can also get you a priority seat at the Nitro Grill. World Championship Wrestling and Capital One have re-launched the WCW MasterCard with new designs and new logos. Added to the card design lineup for the card's second year are WCW superstars, Ric Flair and Konnan. Cardholders also now get priority seating at the new WCW theme restaurant, the Nitro Grill, now open in the Excalibur Hotel & Casino in Las Vegas. The WCW MasterCard was launched October 1, 1998, at a press conference with 10,000 fans at the New York Stock Exchange. The program offers 10 different credit card designs from which fans can choose including the two newest designs, Flair and Konnan, as well as some of the organization's most famous faces Hollywood Hulk Hogan, Goldberg, Diamond Dallas Page, Sting, the Nitro Girls and Kevin Nash. The WCW and NWO (New World Order) logos are also available. Capital One and WCW offer a toll-free number, (800) WCW-CARD, to apply for the card.
