Are credit card rates too high? The answer is a resounding YES! The Federal Reserve just gave the banks $600 billion in cash in the form of a second round of quantitative easing. What are they doing with it? Raising the rates on credit cards, of course, so they can turn that $600 billion into $1.2 trillion in four years.

You are probably wondering how they are doing this. It's very simple. If you use the rule of 72s, at 18%, money doubles itself every four years (you divide 72 by the rate of interest).

Continue reading Are Credit Card Interest Rates Too High?

Are Credit Card Interest Rates Too High? originally appeared on BloggingStocks on Wed, 02 Feb 2011 11:00:00 EST. Please see our terms for use of feeds.

I found a rather interesting article on Bloomberg, one discussing the potential of smartphones to replace credit cards. Supposedly, both AT&T (T), Verizon (VZ), and perhaps T-Mobile, may work with Discover Financial Services (DFS) and Barclays (BCS) in Atlanta and three other cities to test a system allowing consumers to pay with the "wave of a smartphone." This move would be the largest effort to attempt mobile payments in America and could serve to cut into credit card use.

Crone Consulting, a credit card consultant, noted that such a move could be a "game-changer" as far as credit cards are concerned. Think of how much such a move could cut into the market share for credit cards. According to the article, Visa (V) and MasterCard (MA) handled 82% of U.S. consumer spending a year ago (that is $2.45 trillion). Now imagine that smartphone users have the ability to simply pass their phone over a reader in order to pay for their purchases.

Continue reading Discover Takes On Rivals with Pay-by-Smartphone System

Discover Takes On Rivals with Pay-by-Smartphone System originally appeared on BloggingStocks on Mon, 02 Aug 2010 12:20:00 EST. Please see our terms for use of feeds.

Continue reading Could Mobile Payment Become a Common, Easy Reality?

Could Mobile Payment Become a Common, Easy Reality? originally appeared on BloggingStocks on Wed, 30 Dec 2009 10:40:00 EST. Please see our terms for use of feeds.

No, don't expect to see windmills and solar panels -- consumers are leaning toward a different kind of green this holiday season: cash. Rather than hit their credit cards, shoppers will only be spending money they have (and can see and touch). Seventy-one percent of consumers are looking to cash and debit cards as their primary form of payment for holiday shopping this year, which the National Retail Foundation pegs as the highest level since 2005.

This could be a problem for the retailers.

Sure, you'd think that the merchant fees on credit cards make cash more attractive to the sellers. But, Ellen Davis, a spokesperson for the NRF, says that most retailers have found they can talk credit card buyers into up-sells more easily. That leads to a bigger basket size and more revenue. Done successfully, it should comfortably absorb the impact of merchant fees. James Roberts, a marketing professor at Baylor University, adds that using plastic makes consumers more likely to buy at all, let alone more.

Continue reading Shoppers going green for Christmas

Shoppers going green for Christmas originally appeared on BloggingStocks on Tue, 17 Nov 2009 14:20:00 EST. Please see our terms for use of feeds.

Consumer bankruptcies have already spiked more than 30% this year, and it looks like the trend shows no signs of flagging. The American Bankruptcy Institute predicts that the tally could hit 1.4 million by the end of the year. So, although there are some experts signaling that the economy is on the upswing, the downstream effects of bankruptcy on consumer spending and corporate balance sheets are going to make it difficult for the market to turn the corner.

In July, more than 126,000 people filed for bankruptcy protection, and the filing rate was up 36.5% for the first six months of 2009 relative to the same period in 2008. The problem is affecting every rung of the social ladder.

Continue reading Consumer bankruptcies set to surge

Consumer bankruptcies set to surge originally appeared on BloggingStocks on Tue, 11 Aug 2009 09:00:00 EST. Please see our terms for use of feeds.

Continue reading Closing Bell: Profit taking to hibernating bulls (ANF, AXP, BBI, DRYS, NKE, YHOO)

Closing Bell: Profit taking to hibernating bulls (ANF, AXP, BBI, DRYS, NKE, YHOO) originally appeared on BloggingStocks on Fri, 15 May 2009 16:00:00 EST. Please see our terms for use of feeds.

Continue reading Credit card crash: Small biz lender Advanta in trouble

Credit card crash: Small biz lender Advanta in trouble originally appeared on BloggingStocks on Tue, 12 May 2009 14:50:00 EST. Please see our terms for use of feeds.

It's beginning to look like people who borrow money on their credit cards are in a strong negotiating position with the credit card issuers. I find this really surprising; however, people have borrowed so much -- $2.4 trillion in installment debt -- that they have the credit card companies in a strong position when it comes to repaying -- or not.

And those credit card companies expect to get stiffed by 44% more over the next five years than they did in the past five. For example, between 2003 and 2008, credit card companies wrote off $275 billion in credit card receivables but in the next five years, they expect not to collect $395 billion.

And just as we see with the government forking over $8 trillion of taxpayer money to financial institutions, the ones that took on too much risk are the ones getting the special deal. This means that if you are delinquent for 90 days or longer; your income is in the right range; you have a broad network of banking relationships; and your credit record suggests missing a payment is an exception rather than the rule then you can get a deal.

Continue reading Will your credit card company forgive 70% of what you owe?

Will your credit card company forgive 70% of what you owe? originally appeared on BloggingStocks on Sat, 03 Jan 2009 17:02:00 EST. Please see our terms for use of feeds.

Credit-card concerns Visa, Inc. (NYSE: V) and MasterCard, Inc. (NYSE: MA) will be shelling out up to $2.75 billion to settle an antitrust suit with Discover Financial Services (NYSE: DFS). Specifically, MasterCard will pay Discover $862.5 million in the fourth quarter, while Visa will fork over $1.89 billion over the course of 2009. Following the release of the settlement's details, an analyst at Keefe, Bruyette & Woods is weighing in favorably on all three firms.

Sanjay Sakhrani called the news "a big win for Discover, as it provides an additional cushion to contend with the implications of a weaker U.S. economy." He expects the payments will add about $1.75 to Discover's earnings per share. However, he also cited the report as an upside catalyst for MasterCard and Visa, as it eliminates an overhang on shares of both companies -- an assertion supported by analyst Julio C. Quinteros, Jr., of Goldman Sachs.

Unfortunately, though, it's not all sunshine and rainbows in the credit-card group today. Morgan Stanley (NYSE: MS) has filed its own suit against Discover in New York State Supreme Court, alleging that it's entitled to a chunk of the $2.75-billion settlement. DFS was spun off from Morgan Stanley last year, and the latter company claims that it should receive a portion of the award under the terms of a special dividend agreement.

Not so fast, says Discover, which alleges that its parent company is in violation of their spinoff agreement, and "the amount of Morgan Stanley's special dividend is a matter of dispute." Morgan fired back that "there is absolutely no basis for Discover's claim that the agreement was breached." Stay tuned to see how this credit-card drama plays out -- in early trading, shares of all three credit card companies were higher.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Visa, MasterCard settle with Discover, but what about Morgan Stanley? originally appeared on BloggingStocks on Tue, 28 Oct 2008 11:11:00 EST. Please see our terms for use of feeds.

Congress is holding hearings today to denounce the credit card practice of raising interest rates of customers who pay on time just because their credit score went down. The real investigation should be of the credit reporting agencies and how they determine those mysterious credit scores. Also, a credit score should be available for free at least once a year just like a credit report is free yearly.

This issue should have been part of the new bankruptcy bill that Congress passed in 2005 when it was clear that the credit card company practices of jacking up interest rates on credit cards to between 25% and 30% was helping to push people over the edge to bankruptcy. But Congress ignored the problem and just made it harder to file for bankruptcy.

Why can credit card companies charge so usurious rates? That's because credit card rates are set on a state by state basis and some states allow more freedom to jack up rates. That's why credit cards are based in states like North Dakota or Delaware that allow these outrageous rates.

Continue reading Congress denouncing credit card practices, but why now?

Congress denouncing credit card practices, but why now? originally appeared on BloggingStocks on Tue, 04 Dec 2007 14:12:00 EST. Please see our terms for use of feeds.

Google slips in eBay's back door originally appeared on BloggingStocks on Mon, 23 Jul 2007 22:04:00 EST. Please see our terms for use of feeds.

Continue reading Bring your debit card abroad, you'll save money

Bring your debit card abroad, you'll save money originally appeared on BloggingStocks on Sun, 17 Jun 2007 15:40:00 EST. Please see our terms for use of feeds.

The practice that involves people "renting" credit history to improve their own credit score will come to an end, according to Fair Issac Corp (NYSE: FIC), the company responsible for FICO credit scores. The change will occur in a new version of its credit score system, the sixth generation, this September.

The move ends the ability for a consumer with poor credit to be placed as an authorized user of another person's credit card, who has great credit. This person would then benefit from having the payment history of the primary cardholder on their own credit report and improve their credit scores.

The practice has grown more common with internet companies popping up offering money to people with good credit to take on those with bad credit as an authorized user, then collecting fees from those consumers for the act.

This is fraud people; plain and simple.

It's hard to believe this practice still exists in the world we live in today. In a nation where state attorney offices and the U.S. attorney's office go after anyone and everyone who looks like they participate in fraud, including UBS Financial Services, Dell Inc. (NASDAQ: DELL) and the one that started it all, the Enron case.

This was considered the "first great scam of the new millennium" by Terry Savage of TheStreet.com. She highlighted that people with poor credit could "borrow" good credit for 60 days and then apply for a mortgage at a lower rate. Maybe that's one of the many reasons why this month's
foreclosure rates rose a whopping 90% year-over-year.

What do you think of this new move from Fair Issac? Do you think this is fair to the people with poor credit? What's your opinion?

Piggybacking stops now, says Fair Issac Corp originally appeared on BloggingStocks on Tue, 12 Jun 2007 14:32:00 EST. Please see our terms for use of feeds.

Tired of carrying around a stack of plastic cards? Hope may be on the horizon, and it could be bad news for MasterCard Inc (NYSE: MA), VISA and others.

National Payment Card has launched a service that allows users to link their driver's license, via the info on its magnetic strip, to their checking account, thus allowing them to use it as a debit card. The program test began in Texas early this year, and will soon expand to convenience stores in the region.

This is bad news for Visa, et.al., for two reasons. First, NPC is undercutting the competition by charging only $.15 per transaction instead of the percentage demanded by the national cards.

The second problem is that this destroys branding of the product. Unless the BMV can be convinced to offer gold or platinum driver's licenses, commoditization of consumer credit may well follow.

This could be only the first step in making use of the new standard for driver's licenses that standardizes mag strip contents. If the market can gain access to the individual recognition and authentication features of the BMV system, the driver's license could become the go-to card for credit transactions, ATM access, or even federal benefits such as welfare and Medicare.

Look for the major players in the market to lobby hard to put roadblocks in the way of this movement. The stakes are enormous, especially in light of Visa's planned IPO.

BMV newest VISA, MasterCard competitor originally appeared on BloggingStocks on Fri, 18 May 2007 12:50:00 EST. Please see our terms for use of feeds.

Problems at FedEx - and it's only Monday originally appeared on BloggingStocks on Mon, 30 Apr 2007 17:02:00 EST. Please see our terms for use of feeds.

MasterCard, Inc. (NYSE:MA) reported a whopping 82% jump in earnings in its first full quarter as a public company. The company's May IPO where its shares debuted at $39 a share was the richest in two years. Around 11:30 today, MA shares were changing hands at $86, up 16% today.

The credit card company posted third-quarter net of $193 million, or $1.42 a share, compared with $106 million, or 79 cents, a year earlier. Revenue rose from $792 million in the third quarter last year to $902 million, a 14% increase attributed to robust credit-card spending in retail stores. Analysts were expecting earnings of $1.08 a share on revenue of $872 million.

With the retail industry posting a 3.8% rise in same-store sales in September, this positive retail environment contributed to MasterCard's results. MasterCard's gross dollar volume rose 15% to $502 million. World-wide purchase volume rose to $365 billion, a 17% increase over the same period last year. In the U.S. and Europe purchase volume grew by 19% and 33%, respectively. Also, the company increased its cards in circulation by 13% to 818 million cards.

Morgan Stanley analysts said MasterCard's results were a "major upside surprise" and praised the company lower advertising costs.

Executives of the company say the company has succeeded "in displacing paper-based forms of payment in all corners of the globe." Quite frankly, as a consumer, I'd have to agree. The cash I carry around is minimal. More than that, in spending on Internet purchases, one prominent choice of payment is credit cards, and with download music business booming, the company is positive on future growth.

MasterCard earnings jump 82%, stock jumps 16% originally appeared on BloggingStocks on Wed, 01 Nov 2006 12:15:00 EST. Please see our terms for use of feeds.