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?