Bank credit card rates will begin to trickle upward next month in the wake of the Federal Open Market Committee (FOMA) decision to raise short-term rates by 25 basis points (bps). It is likely credit card rates in the first quarter will return to 2010 levels.
The FOMC’s stunning decision today not to raise rates will be very confusing to card issuers and the stock market. However, credit card issuers are preparing for the certain rate adjustments by year’s end.
U.S. bank credit card rates edged down slightly in February, 15 basis points (bps) from the prior month of 13.68%, however the stage is set for substantial rate hikes this year due to anticipated rate hikes by the FOMC in the second half. RAM Research forecasts U.S. bank credit card rates for accounts assessed interest will hit 13.77% at mid-year, then climb to 14.24% by end-of-year (EOY) 2015.
Facing the real possibility of one FOMC rate hike in the second quarter and two additional rate hikes in the second half of 2015, U.S. credit card rates will likely return to the highest rates in five years. RAM Research forecasts U.S. bank credit card rates for accounts assessed interest will climb to 14.24% by EOY 2015.
If the Federal Open Market Committee (FOMC) moves interest rates upward then bank credit card interest rates are set to move into the 30%+ territory among the nation’s top issuers. Over the past year, with no movement in the Prime Rate, overall rates have been climbing.
Among automated clearing house (ACH) processors, 63.4% have seen transaction dispute volumes increase in 2009, 27.2% of which having indicated less than a 5% rate of growth. However, 25% indicated a transaction dispute volume grew between 5 and 10% while 6.7% reported an increase of 11 to 20% and 4.5% saw disputes grow by more than 20%. These findings, according to the results of survey conducted by eGistics information management solutions, result in higher operations costs and more write-offs and losses for many of the processors. Additional findings show 29.5% believe higher ACH transaction dispute volumes are a function of higher overall ACH volumes; 9% cite increasing customer familiarity with ACH payments; and 11.3% indicate their volume of ACH transaction disputes declined in 2009 while 15.9% saw no change.
Vivonet has inked agreements with Sodexo to deploy its Halo POS technology into the majority of Sodexo’s 6,000 North American client sites by 2015. Sodexo serves customers across a range of industries, including health care facilities, retirement homes, schools, college campuses and retail outlets. The value of this agreement is pegged to represent over $60 million in revenue to Vivonet over the period to 2015. Vivonet is the restaurant industry leader in SaaS solutions that enable, acquire and organize over one hundred million transactions every month for customers in Canada and the United States. Vivonet provides Halo Secure Web Based point of sale (POS) and on-demand enterprise management, POS, payment processing and performance benchmarking solutions for its customers.
With more than 83% of consumers actively seeking out rebates, prepaid rebate cards are pegged to increase annual volumes substantially. More than $2.5 billion has been loaded onto rebate cards and 95% of consumers say they would definitely/maybe chose a prepaid rebate card over checks. This, according The Network Branded Prepaid Card Association (NBPCA), also shows consumers that redeem rebates are part of the 60 million underbanked without bank accounts. Since Prepaid rebate cards are branded by American Express, Discover, MasterCard or Visa, the funds can be used anywhere and usually do not expire for at least twelve months.
Of the more than 350
million U.S. debit
card holders, 37% have had an insufficient funds transaction
covered by an overdraft protection program within the past year.
Before the recession, the
overdraft protection market was predominantly made up of light and
moderate NSF users — with a small number of heavy users accounting for
the vast majority of overdrafts and NSF fees. As of March 2010,
according to NE-based ACTON Market Intelligence conducted in
February and March, a
majority of overdrafters remain light users (1 to 4 ODs per year).
However, more than one-in-three of the over-drafters are heavy users,
accumulating more than 10 overdrafts per year. That data suggests that
some non-over-drafters became light users, and moderate over-drafters
became heavy users, which considerably widens the market affected by
Regulation E. Users tend to
average around 42 years old, white
female, empty nesters, who tend to own rather than rent their homes, and
have annual household incomes of $48,500.
Credit card companies are at their drawing boards brainstorming ways to bypass Federal Reserve Board rules and a new federal law set to take full effect in late February 2010, as 80 million families with one or more credit cards continue to be hit with unfair interest rate hikes and fees. Issuers that hold over 400 million credit card accounts conduct practices the legislation is targeting, including manipulation of interest rates, padding of miscellaneous fees and a deceptive policy on late-payment fees. This, according to a new research report from the Center for Responsible Lending entitled “Dodging Reform: As Some Credit Card Abuses Are Outlawed, New Ones Proliferate,” show practices make it all but impossible for the average person to determine the real cost of credit card debt with issuers’ eagerness to exploit loopholes in the new federal rules underscores why lawmakers need to pass legislation to create the Consumer Financial Protection Agency. The report also spotlights the “pick-a-rate” practice, for which a card company tells cardholders their interest rate will be pegged to the prime rate, adding language to the issuer to pick the highest prime rate in a 90-day period – no longer a single day.
The UK aggregate credit card charge off index increased to 11.8% in
September 2009, almost doubling from the levels observed in Q1 2008,
thanks to the MBNA I and MBNA II master trusts. Following months of
continuous deterioration, the sector is beginning to show some
preliminary signs of stabilisation, with delinquency rates flat or
decreasing across most trusts for the past three to four months. The
pace of increase of charge offs appears to be reducing across most
trusts, according to Moody’s, which also cautions Christmas spending
could lead to a post-Christmas rise in arrears for a mid-2010 increase
in charge-offs. Meanwhile 3Q/09 figures released by the Insolvency
Service revealed personal insolvencies had reached their highest level
since records began in 1960, up 28% on the same period last year.
Moody’s continues to have a negative outlook for the UK credit card
sector and is pegged for possible downgrade.
Payment outsourcer TSYS has appointed Amit Sethi to the position of
Managing Director of TSYS India and South Asia.
Sethi has held several executive positions with companies such as Visa
International,
KPMG, Bank of America, HSBC, Oracle Corporation and iGate. Most
recently, he was Global Sales Head of Financial Services and Service
Industries for Sutherland Global Services, where he was responsible for
leading a global sales team for selling Business Process Outsourcing and
Call-Center services delivered out of centers in five countries,
including India, the Philippines, the United States, Canada and Mexico.
Sethi earned a bachelor’s degree in commerce from University of
Delhi and a master’s degree in business administration from the
University of Rochester, New York and is a Chartered Accountant. TSYS’
existing footprint includes some of the highest ranked banks in
India and in 2006 TSYS successfully achieved one of the largest credit
conversions outside of the U.S. for India’s second largest bank and
largest private sector bank.