topic Re: Nice Chat About the Future of Credit Cards in Credit Cards

Nice Chat About the Future of Credit Cards

Anonymous — Tue, 26 May 2009 06:19:44 GMT

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.

Re: Nice Chat About the Future of Credit Cards

Anonymous — Tue, 26 May 2009 07:05:54 GMT

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

Re: Nice Chat About the Future of Credit Cards

Lyythine — Tue, 26 May 2009 08:06:59 GMT

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.

Re: Nice Chat About the Future of Credit Cards

Anonymous — Tue, 26 May 2009 16:28:55 GMT

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.

Re: Nice Chat About the Future of Credit Cards

Imhotrodcrazy — Tue, 26 May 2009 17:34:22 GMT

@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.

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.

Re: Nice Chat About the Future of Credit Cards

GregB — Tue, 26 May 2009 18:22:15 GMT

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?

Re: Nice Chat About the Future of Credit Cards

athensguy — Tue, 26 May 2009 18:50:35 GMT

@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.

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

Re: Nice Chat About the Future of Credit Cards

Imhotrodcrazy — Tue, 26 May 2009 19:19:10 GMT

@athensguy wrote:
@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.
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

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

Re: Nice Chat About the Future of Credit Cards

Imhotrodcrazy — Tue, 26 May 2009 19:22:42 GMT

@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?

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

Re: Nice Chat About the Future of Credit Cards

Anonymous — Tue, 26 May 2009 20:31:01 GMT

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.

Re: Nice Chat About the Future of Credit Cards

Anonymous — Tue, 26 May 2009 20:47:32 GMT

TD bank has simply flexable visa which rate is based on the payment 4% or less 19.99 5-9.99% 13.99 10+ 7.9

Re: Nice Chat About the Future of Credit Cards

Anonymous — Tue, 26 May 2009 20:50:35 GMT

well the FTc is already regualating them start july 2010

Re: Nice Chat About the Future of Credit Cards

Anonymous — Tue, 26 May 2009 21:50:07 GMT

There's a nice commentary in form of a letter in the Wall Street Journal:

We Are Raising Your Rate

Re: Nice Chat About the Future of Credit Cards

Imhotrodcrazy — Tue, 26 May 2009 23:34:08 GMT

@Anonymous wrote:
There's a nice commentary in form of a letter in the Wall Street Journal:

We Are Raising Your Rate
__________________________________________________________________________________

Ulan, What a great article. I got quite a chuckle out of it. Thanks for sharing.

Re: Nice Chat About the Future of Credit Cards

Anonymous — Thu, 28 May 2009 02:55:13 GMT

@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.

Did they happen to tell you the reasons for this? From what everyone says here on the forums you usually are given reasons for any adverse actions/

Re: Nice Chat About the Future of Credit Cards

Imhotrodcrazy — Thu, 28 May 2009 17:30:31 GMT

@Anonymous wrote:
@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.
Did they happen to tell you the reasons for this? From what everyone says here on the forums you usually are given reasons for any adverse actions/

They said my DTI was a "little" bit high, which it is not. However, I went to my local credit union and got the loan I wanted right away. I just wont deal with USbank anymore.

Re: Nice Chat About the Future of Credit Cards

Anonymous — Sun, 31 May 2009 10:41:38 GMT

Glad to hear that you got what you wanted from your Credit Union. I have been a customer of US BANK for a long time and yes, they can get strange but I have eliminated that problem.

Over the last few years I have developed a nice relationship with the branch manager and anytime I have ever had an issue I went directly to them. They have immeadiate access to our deposit accts, can see how long we have been customers and have never failed to resolve any issues quickly.

It seems in this day and age people want the "instant decision" and unfortunately the machines can not see everything that a person can which is why I stress having a contact person at the bank. I think this has also been proven by the amount of people here who post of success by "recons" with the issuer.

Re: Nice Chat About the Future of Credit Cards

Imhotrodcrazy — Sun, 31 May 2009 17:57:25 GMT

@Anonymous wrote:
Glad to hear that you got what you wanted from your Credit Union. I have been a customer of US BANK for a long time and yes, they can get strange but I have eliminated that problem.

Over the last few years I have developed a nice relationship with the branch manager and anytime I have ever had an issue I went directly to them. They have immeadiate access to our deposit accts, can see how long we have been customers and have never failed to resolve any issues quickly.

It seems in this day and age people want the "instant decision" and unfortunately the machines can not see everything that a person can which is why I stress having a contact person at the bank. I think this has also been proven by the amount of people here who post of success by "recons" with the issuer.

I tried the "recon" route twice, it didnt help. So, I am off to better hunting grounds. I am in the process of looking for a better bank. More than likely, it will be my local credit union.

Re: Nice Chat About the Future of Credit Cards

Anonymous — Mon, 01 Jun 2009 19:48:03 GMT

@Lyythine wrote:
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.

<snip>

But FICO doesn't rule in Europe. In the U.S., if you let a $5k balance report (PIF'd after statement or not), you'd better have $50k in credit available to keep your util at 10% (even lower would be better), to avoid AA and the domino effect it can have.

Until/unless FICO changes the scoring model, it's not at all unreasonable to have one's available limits be 10x what Europeans might be expected to have. Available credit doesn't equal debt.

Re: Nice Chat About the Future of Credit Cards

Anonymous — Mon, 01 Jun 2009 19:53:48 GMT

@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.

Nice article DickC