Nice Chat About the Future of Credit Cards

[Anonymous]

In a way, I was a bit hesitent about posting this, because my credit situation id different then most peoples, but since the board seems to be wondering about whats going to happen in the CC business, I thought I would relate a conversation I had with a dear friend this Friday.

He is a Sr, VP at US BANK and we we discussing the "Banking and Credit Card Industry". Now of course, US BANK is probably considered a more "conservative" lender then most but he told me that they (US BANK) had been rethinking how they handle their CC Business for about the last six months and this was what they had thought of for a "model" to use for changes.

FIRST, he told me they had to estimate the "nuclear option" on CC Exposure and how much they needed to pare to assure their survival, even under the worst of conditions. He said that they decided they needed to reduce their CC "exposure" by ABOUT 20% and this would be done through lowering of credit limits, offering lower initial credit limits and smaller CLI's.

Next, in regards to Interest rates, he said market studies had shown that consumers were much more receptive to a "tiered" system of rates and he felt they would go that way. He said they were looking at 4 basic rates for consumers, based on credit, length of time, payment history etc, of 5.9%; 9.9%; 13.9% and 17.9%. Your rate , as he said would be based on the factors mentioned. Customers would also be automatically "moved" into these rate categories based on payment patterns.

Of course these are "purchase" rates, not cash advance rates and also not DEFAULT RATES.

In a "money saving" move, most "rewards" programs would be eliminated  and also many "promotional rates" such as 0% balance transfers, etc.

In regards to "Annual Fees" he said one idea being floated is a "monthly maintenace fee" in the 3 to 4 dollar range. When I asked him about this, he said one of the BIGGEST expenses they have is getting a statement out to people. He said they were considering that if a customer went "paperless" (all handled online, including statements, etc) that you would not be charged this fee. When I asked why "monthly" he said it has been shown that is best as it allows the customer to move from one way (statement to wireless) and not have to wait for a yearly fee date or having to prorate a return of an annual fee.

He said as far as CLI's, they would be done on a yearly review basis but they would also always have an "emergency option" available, such as you have an unexpected expense come up, but it seems like CLI's just "because" are not going to happen. ((JUST MY OPINION, but I think MOST BANKS will adopt something like this))

Also, he said that every account will have a 10% "buffer" meaning you can exceed your credit limit by up to 10% and NOT be charged an "over limit fee" as long as it is rectified by the end of the next billing statements.

Through all this, what I basically got was that there will be some changes made and to be very honest with you, I see nothing in what he mentioned that I would consider out of line.

I think we are entering a new era in credit and frankly, when one sees the situation we are in, it leads them to think it is a good idea.

Just wanted to share this. Hope some find it interesting.

[Anonymous]

Well I currently have a Us Bank CC without rewards so I won't be missing that. Thanx for the info

[Lyythine]

While reading your post, I was struck by how similar this is to some European systems are run.  As I have alluded to in a couple posts, I have lived most of my childhood and adult life outside of the US (although I am a US citizen) because my mother has worked at several US embassies and consulates throughout Europe, Middle East, and Asia.  In most middle eastern and european nations, credit is based upon your prior banking history and what liquid assets you have available. Not like here in the US where someone making 50k a year, 5k in savings gets a 30k limit credit card which they will never be able to pay back in a reasonable amount of time if needed.  

In response, if this is where the industry is headed, I am more than ok with that.  There is no reason we should be in the current financial situation except for greed on both sides: Comsumer and Banks.  All I hear is the greed of the banks and how they caused this entire situation.  Yes, Ill give it to you that some banks/equity firms prospected beyond compare, however, they banked on the idea that their extended credit would be able to make payments, fulfill their obligations as customers, however, that didnt happen, instead, we went out, bought TV's, Cars, etc: that we couldnt afford and said "oh well, im sure the bank makes enough profit to not care"  

I think its a much needed change in the system and hopefully the rest of the indusrty will move in this type of a direction.  

I do disagree with one aspect of that arguement.  I do feel that some banks will keep the rewards card idea.  If not on 5 out of 7 of their cards, perhaps just one card that they offer, which would only be available to those with outstanding credit, or those who spend a great deal per month - and with that card, will come a substantial annual fee to make up for the fact that most of these users will PIF at the end of the month... much like how AMEX started as a corporation. 

[Anonymous]

I kinda feel like that also, that most banks will keep at least some sort of card that offers rewards. Also you are correct by my way of thinking that indeed we have to look at ourselves at being part of the problem.

Thats always hard to face but indeed it is true.

[Imhotrodcrazy]

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@Anonymous wrote:

In a way, I was a bit hesitent about posting this, because my credit situation id different then most peoples, but since the board seems to be wondering about whats going to happen in the CC business, I thought I would relate a conversation I had with a dear friend this Friday.

He is a Sr, VP at US BANK and we we discussing the "Banking and Credit Card Industry". Now of course, US BANK is probably considered a more "conservative" lender then most but he told me that they (US BANK) had been rethinking how they handle their CC Business for about the last six months and this was what they had thought of for a "model" to use for changes.

FIRST, he told me they had to estimate the "nuclear option" on CC Exposure and how much they needed to pare to assure their survival, even under the worst of conditions. He said that they decided they needed to reduce their CC "exposure" by ABOUT 20% and this would be done through lowering of credit limits, offering lower initial credit limits and smaller CLI's.

Next, in regards to Interest rates, he said market studies had shown that consumers were much more receptive to a "tiered" system of rates and he felt they would go that way. He said they were looking at 4 basic rates for consumers, based on credit, length of time, payment history etc, of 5.9%; 9.9%; 13.9% and 17.9%. Your rate , as he said would be based on the factors mentioned. Customers would also be automatically "moved" into these rate categories based on payment patterns.

Of course these are "purchase" rates, not cash advance rates and also not DEFAULT RATES.

In a "money saving" move, most "rewards" programs would be eliminated  and also many "promotional rates" such as 0% balance transfers, etc.

In regards to "Annual Fees" he said one idea being floated is a "monthly maintenace fee" in the 3 to 4 dollar range. When I asked him about this, he said one of the BIGGEST expenses they have is getting a statement out to people. He said they were considering that if a customer went "paperless" (all handled online, including statements, etc) that you would not be charged this fee. When I asked why "monthly" he said it has been shown that is best as it allows the customer to move from one way (statement to wireless) and not have to wait for a yearly fee date or having to prorate a return of an annual fee.

He said as far as CLI's, they would be done on a yearly review basis but they would also always have an "emergency option" available, such as you have an unexpected expense come up, but it seems like CLI's just "because" are not going to happen. ((JUST MY OPINION, but I think MOST BANKS will adopt something like this))

Also, he said that every account will have a 10% "buffer" meaning you can exceed your credit limit by up to 10% and NOT be charged an "over limit fee" as long as it is rectified by the end of the next billing statements.

Through all this, what I basically got was that there will be some changes made and to be very honest with you, I see nothing in what he mentioned that I would consider out of line.

I think we are entering a new era in credit and frankly, when one sees the situation we are in, it leads them to think it is a good idea.

Just wanted to share this. Hope some find it interesting.

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IMO, USbank speaks with a forked tongue.  I was denied a cc with them about 2 weeks ago.  They pulled EX to check my credit and I had a 790 score.  In addition, I have a perfect 17 yr perfect mortgage payment history with them.  Also,  I do not have one bad mark on my EX report.  Go figure.

[GregB]

The Original Post was about a senior bank officer talking about the direction of their credit cards. What does that have to do with one single action?

[athensguy]

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@Imhotrodcrazy wrote:
IMO, USbank speaks with a forked tongue.  I was denied a cc with them about 2 weeks ago.  They pulled EX to check my credit and I had a 790 score.  In addition, I have a perfect 17 yr perfect mortgage payment history with them.  Also,  I do not have one bad mark on my EX report.  Go figure.

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Where did that EX score come from? Did they tell you your score when you applied for a CC?

Message Edited by athensguy on 05-26-2009 02:50 PM

[Imhotrodcrazy]

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@athensguy wrote:

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@Imhotrodcrazy wrote:
IMO, USbank speaks with a forked tongue.  I was denied a cc with them about 2 weeks ago.  They pulled EX to check my credit and I had a 790 score.  In addition, I have a perfect 17 yr perfect mortgage payment history with them.  Also,  I do not have one bad mark on my EX report.  Go figure.

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Where did that EX score come from? Did they tell you your score when you applied for a CC?

Message Edited by athensguy on 05-26-2009 02:50 PM

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Yes, the bank told  me what that score was when I called them back for a recon. 

[Imhotrodcrazy]

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@GregB wrote:

The Original Post was about a senior bank officer talking about the direction of their credit cards. What does that have to do with one single action?

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Point was, and still is,,,,,,doesnt matter if it is about "one" single action or many,  USbank still talks with a forked tongue, IMO.

[Anonymous]

The whole point of rewards is to attract a specific consumer segment: low-risk, non-revolving, transactors. This segment reliably pays their bills, in-full and on-time, and makes a lot of transactions. If one credit card company decides to eliminate its rewards programs, these people will just find another company that will give them rewards on their credit card purchases.

I think that unless the government steps in to regulate credit card companies, rewards programs aren't going anywhere.