September 29, 2008 by Justin McHenry

When JP Morgan Chase bought the assets of the failed bank Washington Mutual for $1.9 billion last week, it became the second biggest bank in the country behind Bank of America. It also became the largest credit card issuer in the United States, at least in terms of outstanding loan balances.

Washington Mutual purchased the credit card company Providian in 2005, and began marketing cards under the WaMu brand as well as being the issuer for credit card partners such as retailers, associations, sports teams, and more. With the WaMu acquisition, Chase not only increases its customer base, but it buys these contractual relationships with outside partners, a valuable asset in the competitive credit card market.

While the credit card market remains competitive, Chase’s acquisition of WaMu — coupled with today’s news that Citi will buy Wachovia — means the market has consolidated further, with even fewer players dominating the lion’s share of the market. This is probably not currently a concern to regulators who are preoccupied with stabilizing financial markets, but over time it could mean less choice for consumers as it becomes more difficult to gain credit and also avoid the higher interest and fees that most of the major issuers offer.

September 24, 2008 By Justin McHenry

The U.S. House of Representative yesterday overwhelmingly passed a bill dubbed the “Credit Cardholders Bill of Rights” by a vote of 312 to 112, but the chances of it passing in the Senate — especially with the massive loan bailout front and center — is much less likely.

The bill’s intent is to curb credit card company practices that are seen as unfair or deceptive, such as the ability to raise interest rates on existing credit card balances, or to raise rates on very short notice. While consumer groups welcome the bill’s passage, the card companies and the White House argue that it takes away the companies’ ability to price for risk and may have unintended consequences, such as further tightening already shaky credit markets.

In the end, whether the bill ultimately becomes law may not matter much. The Federal Reserve has already proposed a set of regulations similar to those in the bill, and it has the ability to enforce these regulations without Congressional approval. Some form of credit card reform is therefore likely early in 2009, although what its final makeup will be is still in doubt.

September 23, 2008 By Justin McHenry

Visa announced today that it has opened the doors for banks and other card issuers to offer Visa credit and debit cards without the raised embossing that most cardholders have come to expect. While on the surface the change seems slight, it is significant in that it gives banks the ability to issue cards immediately — customers who apply at a bank branch or other physical location can be approved and walk out with a card on the same visit.

Visa had run a series of pilot tests that it considered to be successful, including testing through Commerce Bancshares, Inc., TD Banknorth and United Heritage Credit Union.

The unembossed Visa cards will work at most merchants, although not at merchants that still use the older style of credit card machine that requires a physical imprint of the card’s information.

September 11, 2008 by Seth Harbison

MasterCard announced yesterday that most Rite Aid drug stores are now accepting its PayPass “Tap & Go” contactless credit & debit cards for payment. The technology, which allows consumers to pass their cards quickly in front of a special reader instead of swiping it through a machine, is designed to speed up the sales process.

Rite Aid has installed the readers at the front counter of 3,800 of its more than 5,000 stores across the country.

The PayPass-enabled MasterCards also allow consumers to pay without signing a credit slip for transactions under $25.

September 4, 2008 By Justin McHenry

American Express ranked first in overall credit card customer satisfaction for a second straight year, according to J.D. Power survey results released yesterday, with Discover Card holders being the second happiest customers. The survey asked over 7,000 credit card customers to rate their card company or companies in 5 areas: interaction; billing and payment process; fees and rates; reward programs; and benefits and services. American Express received a score of 783 out of a possible 1000, and Discover had a score of 751.

Rounding out the top eight, in order, with point totals: National City (721), Chase (719), U.S. Bank (716), WaMu (712), Citi (710), and Wells Fargo (709).

Other major issuers did not rank so well. HSBC (667 points), Capital One (678), Target National Bank (issuer of the Target Visa, 682 points), GE Money (683) and Bank of America (692) significantly lagged the competition.

The survey noted that just over 70% of credit card holders have reward programs associated with their cards, and the level of satisfaction with a card is dramatically higher when a reward such as cash back, travel, etc. has actually been awarded to the customer.

September 3, 2008 By Justin McHenry

Southwest Airlines announced yesterday that, beginning September 9, the airline would only except credit cards and debit cards for on-board purchases — no cash allowed. Southwest is not the first but is the largest airline to go cashless on board.

Alaska Airlines recently announced its “cashless cabin” and some smaller airlines have gone that route as well. US Airways has tentative plans to go cashless next year.

Flight attendants on Southwest flights will have hand-held card readers in order to take payment for alcoholic drink and Monster energy drink orders; other drinks and snacks remain free.

Holders of the Southwest Airlines Rapid Rewards credit card may welcome the news, as they receive double miles for Southwest purchases, now including their on-board purchases.