Posts Tagged 'bank'

Store credit cards make more, cost more

A news item from the Wall Street Journal confirms what we’ve found – that store cards (like from Target, Kohl’s, or Best Buy) cost more than a plain old credit card:

A chunk of the customer base for these cards is made up of low-income households and less credit-worthy borrowers. As a result, these cards typically carry higher interest rates and lower credit lines than general-purpose cards.

Store label card issuers also make more off these cards.

“Issuers of retail credit cards make $16 to $18 of interest and fee income on every $100 loaned out, before subtracting expenses,” the Journal says. “Earnings on general-purpose cards typically are $14 to $15 per $100 loaned.”

That one or two dollar difference may not seem like a lot, but multiply it by thousand dollar balances and the millions of people who have store cards, and it adds up to a lot of profit for credit card issuers.

Customers think that by signing up for the store card and getting 10% off a purchase (for instance), they’re getting a good deal. Over the long term, however, these store brand cards can cost you more.

Exposed: Best Buy credit card has no good options

Best Buy, the giant electronics and appliances retailer, offers a MasterCard from “the world’s local bank” HSBC that gives you two options: a higher rate, or an annual fee. Neither option is good for you.

The tricky part is that you don’t learn this until you start to fill out Best Buy’s online application. It’s not until you’re just about ready to say “give me the card” that they let you know the bad news. And here it is:

You get the “choice” between a card with an annual percentage rate of 17.99%, 22.99%, or 21.74% if you opt for an annual fee.

If you opt for the annual fee, how much is it?

So you pick – up to 22.99% a year, one of the highest purchase interest rates we’ve seen, or $59 a year. That’s not much of a choice.

And since Best Buy hides their disclosures behind their online application, we downloaded it for you and we’re making it available. Check it out for yourself.

American Family Voices: wrong on Interchange

American Family Voices doesn't know quack

We got a funny fax the other day from American Family Voices, a lobby group that’s looking to enact Interchange reforms that could hurt our debit card program.

Here’s the fax. Pretty goofy, right? So goofy that it relies on that ol’ banker trick of trying to paint credit unions as do-gooder banks. AFV is trying to do two things at once: dig up the outdated banker argument, and – at the same time – spin it to fit their Interchange views.

It’s a bunch of quack. Here’s the full text of the fax we got:

If it walks like a bank, talks like a bank, and quacks like a bank… it should be TAXED like a bank.

In 1934, Congress gave not-for-profit credit unions tax-exempt status due to their unique role as lenders of last resort for the poor and underserved.

But today, credit unions comprise a $680 billion industry. This is not your grandfather’s credit union.

So why are these not-for-profit credit unions crying wolf about common sense interchange swipe fee reform?

Credit unions are carrying the water for credit card giants VISA and MasterCard— and the big Wall Street banks that helped cause the financial crisis.

It’s about protecting profits.

Interchange fees cost small businesses and consumers $48 billion every year.

If credit unions want to play with the big boys—and share in their profits—then Congress should tax them like banks.

Today, American Family Voices took out an ad in Politico to tell Congress that credit unions should no longer receive special treatment… and to make sure to pass the Durbin Swipe Fee amendment into law.

We’ve already made our position on Interchange clear, and we can argue about the merits of that all day long. But tying us together with the “big Wall Street banks that helped cause the financial crisis”?

I don’t think so.

Credit unions are tax-exempt because we’re member-owned, we have a volunteer board of directors, and we still serve the underserved. We don’t take the money we make and give it to stockholders or investment groups; we give it back to our members.

AFV claims that “credit unions comprise a $680 billion industry. This is not your grandfather’s credit union.” Well of course not – is growth a bad thing? Credit unions have grown partly due to customers’ disgust with big banks, but our industry is still dwarfed by the for-profit banking industry.

There’s nothing “common sense” about the Interchange reform that lobbyists like AFV are calling for. It’s not going to lower costs for consumers, and it may end up costing them more due to changes in debit card policies if this thing goes through.

Running a debit card program costs money, and Interchange helps credit unions like us pay for the system. You don’t get your electricity for free; you have to pay a power company to deliver that electricity to your home because the delivery costs money. Same with card programs. We hire in-house service employees to help you with your American 1 card questions, and we use Interchange to help pay their salary. And provide security. And provide convenience and a no-annual-fee debit card. Debit card programs don’t run themselves.

Groups like AFV, however, say that we make too much off Interchange fees, and that Interchange fees should only pay for the transmission of the account information. But that’s like paying for just the electrons that cross the power lines. What if a power line goes down? What if a transistor explodes? What if your entire town loses power? Who pays for that?

The only water we’re carrying is for our members. Visa and MasterCard can take care of themselves, and certainly Wall Street big banks can flex their own political muscles. We don’t need or want to help them. American 1 looks out for our members’ needs, first and foremost.

No quacking about it.

Be sure to write or call your local Congressional representative (including Senators Carl Levin and Debbie Stabenow in Michigan, plus local U.S. Representatives Mark Schauer, Gary Peters – who serves on the committee involved – and Mike Rogers) and let them know, as a member, you oppose Sen. Richard Durbin’s Interchange Amendment to the Restoring American Financial Stability Act.

AmEx Centurion and BoA Accolades card: exclusive, expensive

American Express’s Centurion card is a coveted item by celebrities and regular Joes and Janes alike. But that exclusive access comes with a pricetag: a $2,500 annual fee.

Now Bank of America is getting in on the act with its Accolades Card. To get one, just have $200,000 at Bank of America.

Easy enough, right?

The key to making money on these cards in the transaction fees, says Forbes.com’s Liz Foyer:

Cards are an obvious way into the market, and though lenders aren’t going to make much in the way of late fees and interest charges (assuming rich people pay their bills on time and in full, which isn’t always the case) they make up for it in the fees they charge to merchants to process transactions. American Express network transactions mean fees of about 4% each purchase, so a $60,000 car charged to a Black Amex could potentially rake in $2,400 in processing revenue.

Unlike the Barclay’s Black Card, these cards really are offered to exclusive individuals – either the super rich or the super well-known.

For every day people like you and me, try a card that’s more down to Earth.

Exposed: debunking the Visa Black Card

Visa Black Card

Maybe you received one of those slick black envelopes in the mail, with an “Invitation Enclosed” message and promises of limited membership and benefits.

This is what the Visa Black Card, fresh from London, England, tries to sell you. But we’re here to tell you it’s not worth it.

We got our hands on one of these “exclusive” invitations thanks to an American 1 member. Put together in fancy packaging, the Visa Black Card mailing says it comes with limited availability, special “luxury” gifts, and a carbon – not plastic! – credit card that will make your dreams come true. It claims, as you can see above, to provide a yacht-club-style membership.

The reality is, when you dig into the details, this card could cost you. Big time.

Visa Black annual fee

First, there’s an annual fee. And it’s a whopper. Almost $500 every year you use this card. Maybe because it’s steered toward the luxury market, the folks at Black Card (actually, a British bank called Barclays which is no stranger to controversy) think a $500 annual fee is nothing.

We think it’s crazy.

Then there are the other fees. If you’re late on a payment, go over your credit limit, make a payment that is returned, or “do any of the above on another account” you have with the fine folks at Black Card – zoom, your rate jumps above 30%.

Those feelings of exclusivity? Hope it’s worth it.

There are other fees, like a cash advance fee, balance transfer fee, and a $2 minimum interest charge, that add up to luxury-style costs. With this card, you won’t feel luxurious for very long.

The Visa Black Card only appears to give you a limited lifestyle. Add it all up, and you need to be fabulously wealthy just to afford this card.

For more in-depth credit card research, visit our Top Secret Visa site, and catch a glimpse of our Visa philosophy at WeUnderstand.org.

Credit CARD Act roundup

There’s been lots in the news now that the Credit CARD Act is hitting financial institutions.

More often than not, however, big banks are the ones doing the hitting – especially with their customer’s wallets.

Here’s a quick roundup of the latest news about big bank credit card practices and what they mean for you.

Credit Card Fees; the new trap (Wall Street Journal): “Banning these and other profitable tactics is expected to cost the card industry at least $12 billion a year in lost revenue, according to law firm Morrison & Foerster. This has sent the industry scrambling to find new sources of revenue. So get ready for higher annual fees, higher balance-transfer charges, and growing charges for overseas transactions.”

It’s a new day for credit cards (WSJ): “Annual and application fees cannot exceed 25% of your credit limit. But don’t get fooled by them. They can represent another form of interest on your account.”

Mixed blessing: credit card reform may shock some (Mlive.com / AP): “During the past nine months, credit card companies jacked up interest rates, created new fees and cut credit lines.”

Remember that American 1 has not participated in the harmful practices, like annual fees, that big banks are bringing back.

To learn what we think of all this, visit WeUnderstand.org and let us know how YOU feel about the new Credit CARD Act.

Good advice: open your statements

A bit of good financial advice from Trent over at the Simple Dollar:

Second, read all of your notices. Even though I’m supposedly on the “paperless” plan for several of my bills, I still receive oodles of statements and messages from these companies. Most of them are completely unimportant to me…

After a while, it’s very easy to become numb to all of it. Don’t. Open every one, read it over, and handle it appropriately. Yes, most of them will go in the trash can. Yes, you’ll often feel like you just wasted fifteen minutes of your life.

But for every fifty useless missives that you read, one will be very important.

We can stress strongly enough how important it is to at least look over your statements.

Sure, if you’re a customer at a bank, you probably get gobs and gobs of mail from them every month. Us? We send minimal mail. And you could get even less if you sign up for e-statements.

But even e-statements are important. You may have important noticed posted to your account under the e-statement system, so make sure you check it at least once a month.

Bank of America pays more bonuses

If you haven’t heard, now that Bank of America has repaid the government for its bailout, its sending plenty of bonuses to its bankers.

The blog 24/7 Wallstreet reports:

Bank of America will also pass out handsome bonuses to its bankers, just a few months after its repaid the government $45 billion in aid that it got to stay in business through the credit crisis. The Wall Street Journal reports that the bonus pool at B of A will be more than $4 billion. Traders will collect an average of $300,000 to $500,000, according to the paper.

The bonuses are a return to 2006 levels, says the New York Times.

So if you’re a Bank of America customer or credit card holder, you’re helping to reward the bankers who played fast and loose with your money.

Compare your card with American 1’s Visa

Next week, we’re launching an initiative called We Understand. We’ve read the news about what big, out-of-town banks are doing to their credit card customers, and we think our Visa card can be a viable alternative to higher rates, annual fees, and hidden charges.

We have so much confidence in our Visa card, in fact, that we’ve done a bunch of research on everyone else’s card for a fair comparison. What’s their rate? What penalties do they charge? How much extra do you have to pay for a balance transfer?

So we’ve lined up our card with dozens of others in a handly, downloadable format – our Credit Card Comparison.

Feel free to download the PDF, browse through what cards are out there, and make your own determination about which card fits you best. Note that, on the comparison, anything marked in red means you’ll pay more with that card. Hopefully that makes it easy to do some comparison shopping.

We think that our combination of hometown service, ScoreCard points for gift and travel rewards, no extra or hidden fees for things like balance transfers and cash advances, and a stable, steady, and affordable rate make American 1 the best place to get a credit card.

But do your own research. And, while you’re at it, watch our fun video.

Credit card annual fee? Not at a credit union

USA Today reports that many banks are bringing back the ol’ annual fee dinosaur in response to the Credit CARD Act.

If you don’t want an annual fee on your card, writes Sandra Block, go with the not-for-profit option:

If you don’t care about rewards and just want a credit card that doesn’t charge an annual fee, consider applying for a card through a credit union. Many credit union cards charge no annual fee and offer below-average interest rates.

Block has just one thing wrong: American 1 offers ScoreCard rewards, which can earn you travel and gift rewards.

Through the rest of the article, however, Block gives options if your big bank credit card starts charging an annual fee or reducing reward programs.


American 1 Federal Credit Union