MBNA Switches From Quarterly to Monthly

A second major issuer has tweaked its variable rate structure, enabling it to pass along future rate increases quickly to cardholders. This week, MBNA is notifying cardholders it is switching its variable rate structure, based on the prime rate, to monthly adjustments instead of quarterly adjustments. The change is effective with MBNA’s October statements. MBNA will now reset its rates using the WSJ prime rate published on the last day of the month. MBNA currently uses March 15th, June 15th, Sept 15th and Dec 15th as rate setting days, applying the rate after the closing date of the billing cycle. Effective August 1st, Bank One changed its index date, from the 22nd day of the month to two days prior to the closing date of the billing cycle. Among the top ten issuers only Capital One resets variable rates quarterly, however it predominately issues fixed rate cards.

VARIABLE RATE INDEX DATES
1. Citibank – Two days prior to the closing date of the billing cycle
2. MBNA – Last business day of the month.
3. Bank One – Two days prior to the closing date of the billing cycle
4. Chase – Last business day of the month
5. Discover – Last business day of the month
6. Capital One – March 25, June 25, Sept 25 and Dec 25: applies day after the closing date of the billing cycle
7. American Express – Higher of the 1st or the 20th of each month
8. Bank of America – Last business day of the month
9. Household Bank – Last business day of the month
10. Providian – 22nd day of each month
Source: CardWatch(R) ([www.cardwatch.com][1])

[1]: http://www.cardwatch.com

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InterCept Shareholder Settlement Approved

Atlanta-based InterCept has received final court approval on the previously announced settlement of the consolidated securities class action litigation filed against the company and several of its current and former officers. The shareholder class will receive a payment of $5.3 million, from which plaintiff’s counsel will be awarded attorney’s fees. InterCept will fund $3.95 million and its insurance carrier will fund $1.35 million of the settlement. Under the terms of the settlement, announced in February, the claims against InterCept and the individual defendants were dismissed without any admission of liability or wrongdoing. InterCept’s annual shareholders meeting is scheduled for September 14th. It is exploring strategic alternatives including a possible sale. (CF Library 2/19/04; 6/25/04)

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Bank One and United Reward Tuition Charges

Bank One and United Mileage Plus have expanded the “More Miles” program to award extra miles for using its co-branded VISA card to charge tuition. Between now and the end of this year, “VISA Mileage Plus” cardholders will earn two miles for every dollar spent exceeding $1,000 paid directly to schools. This includes tuition for colleges and universities, as well as public and private elementary and secondary schools, school bookstore purchases, season football tickets, school donations and more. Bank One and United also have a current promotion offering “extra credit” for purchases from special retailers through September 30th.

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CITI 2Q/04

Citigroup reported that its international cards business produced second quarter net income of $162 million, an increase of 49% over the year-ago quarter. During the quarter the issuer added a record 4.7 million net accounts to its open account base, outside North America, driven by a higher marketing investment. Charge volume for international credit cards was up 41%, to $12.7 billion for the second quarter. Total outstandings for international cards were $15.7 billion as of June 30th, a 29% gain over one year ago. In Japan, average credit card loans were flat sequentially, but up 20% over year ago figures. In the rest of Asia, credit card loans grew 30% to $8.2 billion. Citigroup holds $5.5 billion in card loans for the EMEA region and $500 million in Latin America, which grew 34% and 25%, respectively. Delinquency and charge-offs both decreased during the second quarter for international cards. Delinquency (90+ days) declined from 2.04% in 2Q/03 to 1.55% for 2Q/04. Delinquency was down 25 basis points compared to the prior quarter. Charge-offs declined from 4.60% in 2Q/03 to 3.25% for the second quarter. Charge-offs dropped 60 basis points from the first quarter of this year. Citigroup noted that its advertising and marketing expense for international cards was up 45% compared to the year ago quarter. Citi targeted Singapore, Turkey, Hong King, and Malaysia during the second quarter of 2004. For complete detail’s on Citigroup’s international cards performance visit CardData (www.carddata.com).

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RapidMoney Transfers to ScotiaCard

RapidMoney Corporation announced it will now make money transfers directly to a Mexican stored value card. Issued by Scotiabank Inverlat, the “ScotiaCard Mi Pago” enables recipients of RapidMoney transfers to withdraw funds from all the ATMs in Mexico and to make purchases without service charges at over 100,000 Mexican stores and restaurants. Senders of “RapidMoney” transfers in the USA request the “Scotiacard Mi Pago,” which is then delivered to the designated recipient in Mexico. Subsequent transfers automatically load the card and provide the transfer recipient continued access to Mexican ATMs, stores and restaurants.

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Merrick Bank Hits Second Quarter Milestones

CardWorks’ Merrick Bank subsidiary has topped $500 million in credit card outstandings for the second quarter, a 21% increase over 2Q/03. The sub-prime specialist also posted a 75% increase in volume with nearly $140 million in the second quarter. The issuer also crossed the 500,000 cardholder milestone during the second quarter. Merrick says the growth came from its ability to execute direct marketing plans and from some acquisitions. In 2002, Merrick Bank purchased a portion of the NextBank credit card portfolio from the FDIC. CardWorks is also the parent company of CMS, a third-party bankcard servicer that also provides servicing and support to Merrick Bank. For complete details on Merrick Bank’s second quarter performance visit CardData ([www.carddata.com][1])

[1]: http://www.carddata.com

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MasterCard Second Quarter Revenues Up 16%

MasterCard reported second quarter net income of $65.7 million compared to $32.3 million one-year ago. Revenues for the first quarter were up 16% to $647.3 million, compared to 2Q/03. Advertising and market development expenses for the quarter were up 17% at $285 million. Authorization, settlement, and switch revenues increased 12% to $31 million for the quarter. Assessments revenue grew $46 million, or 23% to $250 million for 2Q/04. For complete details on MasterCard’s second quarter results visit CardData ([www.carddata.com][1]).

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MasterCard Net Income Track Record
2Q/02: $36 million
3Q/02: $78 million
4Q/02: -$51 million
1Q/03: -$425 million
2Q/03: $32 million
3Q/03: $74 million
4Q/03: $67 million
1Q/04: $74 million
2Q/04: $66 million
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com
[2]: /images/g/graphs/mcprofits2q04.jpg

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ReD Adds PayPal to it Payment Gateway

NJ-based Retail Decisions has added PayPal as an additional payment option through its payment gateway. This will enable all ReD’s online merchants around the world to benefit from this agreement with PayPal. ReD’s payment processing customers include Walmart.com, Buy.com, Netflix, RealNetworks and Travelocity.com. Retail Decisions (ReD) is an international electronic payment transaction services business that provides fraud prevention, enterprise-wide payment processing and value-added transaction and consulting services to the retail, finance, telecommunications and e-commerce sectors.

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Providian Offers a NASCAR Sweepstakes

Providian has joined VISA’s “2004 Ultimate NASCAR Experience” promotion offering cardholders a chance to win a total VIP treatment to a NASCAR event. Cardholders are automatically entered to win through September 15th. The grand prize includes round-trip airfare and ground transportation, weekend accommodations in a luxury motor coach at the track, VIP access and attendance at the pre-race driver’s meeting, and a hot lap in a pace car with either Rusty Wallace or Kurt Busch. Each of four first place winners will receive a 42″ Panasonic plasma screen TV, and 250 second place winners will receive a NASCAR gift pack.

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OFT Challenges MBNA’s UK Default Charges

MBNA has been notified by the U.K.’s Office of Fair Trading that the OFT intends to challenge MBNA’s default charges, such as late, over-limit and returned check fees. The OFT began an industry wide investigation into alleged unfair contract terms in March after Parliament’s “Treasury Select Committee” asked credit card issuers to stop overcharging and misleading customers. The “Unfair Terms in Consumer Contracts Regulations 1999” render unenforceable credit agreement terms relating to default charges to the extent they are disproportionately high in relation to their actual costs to the card issuer. The OFT made inquiry during March to eight card issuers seeking information on revenue generated from penalties imposed on cardholders. Other US-based issuers operating in the UK have not confirmed an OFT challenge. MBNA says it is possible that future default charges revenue could decline and that refunds may be ordered if the OFT prevails. MBNA said it is still assessing the situation.

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