Credit Card Mergers Do Not Affect Card Usage, Says Cardbeat

WESTBURY, N.Y.--(BUSINESS WIRE)--In the past few years, the credit card industry has witnessed landmark
mergers between issuers such as Bank of America and MBNA, JPMorgan Chase
and Bank One, and Barclays and Juniper Bank, among numerous others.
Two-thirds of cardholders whose issuers have been a part of a merger
have not changed the ways they use their credit cards post-merger,
according to research recently published in Cardbeat®,
the syndicated market research report by Auriemma Consulting Group (ACG).

“These consumers were pleased with the
customer service, card pricing and rewards of their credit cards, and
chose to continue using them because the products and features did not
change after the merger,” says Megan
Bramlette, managing editor of Cardbeat.

Overall, consumers are neutral on bank mergers, with 68% expecting
little change to their opinion of their credit card company if their
card issuer was bought or sold.

“Consumers care less about the bank that
issues their card and monthly statements than the benefits they receive
from that relationship,” Bramlette says.
Falloff in activity occurs when card rewards are not as rich post-merger
as they were before, or when interest rates and account fees on the
portfolio rise.

“Merging banks need to consider how consumers
will react to their products post-merger,” she
continues. “Our research shows that most
consumers are confident about the ongoing independence of their current
credit card issuers and have made it clear that they will remain loyal,
even after a merger, as long as cardholder benefits and service levels
remain the same.”

The information in this release includes data from 401 credit card users
surveyed in February 2007. The findings were originally published in the
February 2007 issue of Cardbeat.

ACG is a management consulting firm in the payments and lending
industry. Cardbeat is a syndicated market research study from ACG that
provides insight into how consumer perceptions impact credit card
acquisition and usage.

Rewards Cards Only Reward the Credit Industry |

Many Warren Reports readers wrote to us following Professor Warren's .  If you haven't done so already, I encourage you to listen to her discussion about the credit card industry.

In the coming weeks I'm going to try to highlight on this blog some of the stories and feedback that folks have asked us to look into and publicize.  Let's start with merchants rather than consumers.

One small business owner wrote regarding the high costs that card processors charge retailers for every credit card transaction.  These fees can range as high as 6 to 7% depending on the volume of transactions and type of card, with rewards card incurring the highest fees. 

Interestingly, some consumers don't realize that the rewards percentages that kick back into their accounts are not coming from the credit card company.  Rather, the business on the other end pays that amount (and then some) towards the transaction.

Many consumers might find these types of redistributions perfectly acceptable, but the point is often missed that businesses often compensate for these expenses by raising prices. 

Moreover, as our reader points out, retailors are not allowed to give discounts to customers who pay by cash or check.  Doing so will cause them to lose the "privilege" of accepting credit cards as a form of payment.

Thus, the merchant's credit card-related expenses get transferred to all customers, those with rewards cards and otherwise, and everyone ends up paying more for every item and every purchase.  What good are those rewards if you're simply paying more up front?

The only group making a profit or deriving a benefit from these arrangements is, of course, the credit card industry.  Our reader suggests that this "smacks of a monopoly." 

But the credit industry wants you to believe that your "1% cash back" or miniscule airline miles reward is a little something extra that you wouldn't receive if you paid by cash.  They're right, to some extent -- but only because they've forced all of us, cash customers included, to systematically pay extra up front.

Sort of puts a damper on the whole reward card/incentive program, no?

CreditCards.com: Weekly Credit Card Rate Report

AUSTIN, Texas--(BUSINESS WIRE)--Average rates for instant approval credit cards edged higher this week,
potentially in response to increased default risk associated with
instant credit decisions. Rates on other popular credit card categories
tracked by CreditCards.com remained unchanged from the previous week and
are listed below:




 


 




Credit Card Rate Averages


 




 




Low Interest


11.59%




Balance Transfer


11.41%




Instant Approval


14.18%




Reward


13.72%




Cash Back


13.13%




Airline


15.07%




Business


13.95%




Student


17.88%




Bad Credit


12.81%




 




 


 

Source:







Updated: 05-03-07


 

Several major credit card companies offer instant online decisions for
their cards as a method for differentiating their products. Issuers are
able to access certain credit bureau facts in near real-time in order to
make rapid credit decisions, usually within 60 seconds. When
insufficient data is available to make an instant online decision,
issuers reserve the right to take a greater amount of time in which to
grant approval or denial of an application involving offline review.

The CreditCards.com national weekly credit card rate survey is conducted
each week using data from the leading credit card issuers in the United
States.

Introductory offer periods and actual regular interest rates can vary
depending on individual applicants’ credit
quality and issuer risk-based pricing policies.

About CreditCards.com

CreditCards.com ()
is an Internet publisher and marketing organization that operates the
leading and fastest growing online destination for consumers to search,
compare, and apply for credit cards. The company matches millions of
consumers each year with the credit card offers that best meet their
financial needs. CreditCards.com is based in Austin, Texas and was
founded in 2003.

NOTE TO EDITORS: The information contained in this release is available
for print or broadcast with attribution to CreditCards.com.

N.Z. Dollar May Gain Versus Australia's on Interest-Rate Gap

New Zealand's dollar may gain against
Australia's currency on speculation that nation's central bank
will leave interest rates unchanged today.

New Zealand's official cash rate is 1.5 percentage points
higher than Australia's 6.25 percent cash target rate. There's
just a 2 percent chance the Reserve Bank of Australia will raise
the benchmark rate at 9:30 a.m. today in Sydney, according to a
Credit Suisse index based on overnight trading in interest-rate
swaps.

``If Australia doesn't go then people will lean toward the
New Zealand'' dollar Alex Sinton, currency dealer at ANZ National
Bank Ltd. in Auckland. ``It's all about the relativity of
interest rates.''

The New Zealand dollar has advanced 7 percent against the
Australian dollar in the past 12 months. That's the biggest gain
of any major currency against the Australian dollar in that time.
New Zealand's 7.75 percent benchmark rate is the second-highest
after Iceland's among countries with the top rating at Moody's
Investors Service, helping swell demand for the local dollar.

New Zealand's dollar bought 89.56 Australian cents at 8:41
a.m. in Wellington, from 89.41 cents in late Asian trading
yesterday. It may rise to 89.80 cents if Australia's central bank
does not increase rates, Sinton said. It fell to 74.07 U.S. cents
from 74.28 cents yesterday.

RBA Governor Glenn Stevens will leave the overnight cash
rate target unchanged today at a six-year high, according to all
26 economists surveyed by Bloomberg News.

Bollard's Strategy

There is a 12 percent chance on the Credit Suisse index
Reserve Bank of New Zealand Governor Alan Bollard will boost
rates at his next monetary policy review on June 6. Bollard
boosted rates twice by a quarter-point in March and April, and
did not warn of further increases at his last review April 26.

The local dollar may extend its drop against the U.S. dollar
today as signs of more economic growth in the world's biggest
economy stokes demand for its currency, Sinton said.

The dollar rose from near an all-time low against the euro
and touched a two-week high versus the yen after a private report
released yesterday showed U.S. manufacturing strengthened last
month by more than economists forecast.

New Zealand government bonds rose after the yield on the
benchmark 10-year note fell 0.04 percentage point to 6.05 percent,
according to data compiled by Bloomberg.

The country's one-year swap spread over the U.S. rate
dropped 0.01 points to 2.86 percentage points today. The one-year
swap over Japan is at 7.33 percentage points, from 7.32 yesterday.

To contact the reporter on this story:
Emma O'Brien in Wellington at