Delinquency and Charge-Offs Stabilize Among Card Bonds

Charge-offs remained stable, but relatively high at 7.2%, among credit card-backed securities during July. Delinquencies also remained stable at 5.1%, the same level as one year ago. Yields have appeared to have leveled off in the 17% range, and the payment rate has remained consistent and strong in the 15% to 17% range, according to Standard & Poor’s “Credit Card Quality Index.” The average charge-off rate of 7.2% for June and July 2003 follows a three-month period in which charge-off rates averaged 7.5%, the second highest historical charge-off rates experienced by the master trusts followed by S&P. On a comparative basis, the 7.3% average charge-off rate for 2003 (year-to-date through July) is 30 bps higher than the 2002 average of 7.0%. However, overall charge-off rates have been relatively stable since the March 2002 peak of 7.6%, ranging from 6.5% to 7.5%. The 30-plus delinquency levels have remained relatively stable in the 5% to 5.5% range, and are currently at their lowest levels since July 2002. However, the overall delinquency trend in the 60- and 90-plus buckets continues to rise. Both the 60- and 90-plus delinquency buckets reached historical peaks in May 2003, posting delinquency rates of 4.4% and 2.9%, respectively. While each of the delinquency buckets improved modestly in July, the 5.3%, 4.1%, and 2.5% average delinquency rates (for the 30-, 60-, and 90-plus delinquency buckets, respectively) for 2003 (year-to-date through July), compared to 2002 averages of 5.3%, 3.6%, and 2.0%, respectively.

Credit Card-Backed Securities Performance
Month July 2001 July 2002 July 2003
Yield: 19.9% 18.8% 17.8%
Payment rate : 16.3% 16.1% 16.8%
Charge-offs: 6.6% 6.8% 7.2%
Delinquencies : 5.0% 5.1% 5.1%
Source: Standard & Poor’s Credit Card Quality Index

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InfiCorp Nails Principal Card Portfolio

Atlanta-based InfiCorp Holdings has acquired Des Moines-based Principal Bank’s $23 million credit card portfolio. Principal, part of the Principal Financial Group, also signed a credit card agent agreement with InfiCorp. The Principal Financial Group has $116.3 billion in assets under management and serves some 13 million customers worldwide. InfiCorp Holdings is a wholly owned subsidiary of First National of Nebraska. The firm has been actively acquiring smaller portfolios, mostly from credit unions. OR-based AssetExchange facilitated the Principal transaction and many of the prior acquisitions.

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American Express Launches a Special Starwood Promotion Next Week

American Express announced yesterday it will launch a special promotion September 15th to enable “Starwood Preferred Guest Credit Card” users to earn up to 5,000 bonus “Starpoints.” Under the promotion, cardholders who use their card to spend $100 or more at Starwood properties can earn 500 bonus points and those who spend $1,000 or more can earn 5,000 bonus points. The bonuses are based on cumulative spending, with cardholders earning either 500 or 5,000 bonus “Starpoints.” The special promotion ends November 15th. The “Starwood Preferred Guest Credit Card from American Express” offers one “Starpoint” for every eligible dollar charged for non-Starwood purchases and three “Starpoints” for every eligible dollar charged at participating Starwood hotels.

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VISA Check Card Volume Up 16% in 2Q/03

VISA reported yesterday that off-line U.S. debit card volume increased 20% during the first half of this year, even though overall U.S. consumer spending grew by only 4.8% during the same period. For the second quarter VISA’s check card volume was up 16.1% to $111.5 billion, while 2Q/03 credit card volume grew 4.6% to $158.8 billion, compared to one year ago. This means that off-line debit card volume makes up nearly 40% of VISA’s total U.S. dollar, based on second quarter results. VISA noted that during the first six months of 2003, consumers used their VISA check cards to spend $8.9 billion on the Internet, with e-commerce volume in the second quarter growing 7.5% over the first quarter. During the second quarter, U.S. consumers used a “VISA Check Card” to make $74.6 billion in purchases and $36.9 billion in cash advances. VISA processed 2.4 billion total debit card transactions during the second quarter, a 15.8% increase over last year. At mid-year, VISA had 136.6 million off-line debit cards in-force attached to 104.3 million accounts. For more details on VISA’s 2Q/03 results visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

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HOLT RENFREW CARD

The first specially designed “Holt Renfrew Card from American Express” was unveiled yesterday in Toronto. Holt Renfrew and American Express announced in early August plans to develop a suite of co-branded credit cards to replace Holt Renfrew’s store credit card. The first card was designed by Italian fashion designer Roberto Cavalli. The card displays a one of a kind silk gown created by Cavalli’, with an estimated value of US$4,000. Cavalli is known for his eclectic and highly original designs. The card includes the new “Holt Renfrew Rewards” program that allows customers to collect one “Holt Renfrew” point for virtually every dollar spent anywhere. Plus, when the card is used at any Holt Renfrew location, cardholders receive 40% more points for every dollar charged.

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Splitska Banka Deploys Euronet’s Credit Card Software

Croatia’s third largest bank will implement Euronet’s “Integrated Credit Card” software in conjunction with Euronet’s “Debit Card System” and “Merchant Management System.” Splitska Banka, a member of HVB Group and the leading VISA bank with 300,000 customers, selected the Euronet card and merchant software packages to accommodate a comprehensive electronic funds transfer business with ATM, POS, debit and credit card solutions. Euronet also has HVB partnerships in Germany, Poland and the Czech Republic.

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California, VISA and MasterCard to Discuss Foreign Exchange Fee Refunds

VISA and MasterCard are reportedly scheduled to appear in California Superior Court today to detail their plans to refund more than $800 million in foreign currency conversion fees to cardholders. In April, Judge Ronald Sabraw found that VISA and MasterCard violated California’s unfair competition law by failing to adequately disclose the currency conversion fees they have charged to U.S. cardholders. VISA, which is headquartered in California, was ordered to refund the one percent currency conversion fees to all cardholders in the USA who paid the fees from February 15, 1996 to the present. MasterCard, which is headquartered in New York, was ordered to refund the currency conversion fees to all its California consumers who paid the fees during the same period. (CF Library 4/9/03)

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JCB & HERTZ

JCB and Hertz Asia Pacific have partnered to promote worldwide tourist demand, beginning with a joint campaign from September 22nd to April 30th, targeting Japanese traveling abroad. The current campaign is intended to build demand among JCB’s more than 45 million Japanese cardholders by added benefits for overseas use. When a cardholder makes a Hertz reservation through JCB Travel and then buys two airline tickets or spends 70,000 yen or more with the JCB Card, he or she receives a coupon good for a one-day free rental in the U.S.A. from Hertz and is automatically entered in a lottery for a variety of prizes. In addition, JCB’s most prestigious card “The Class” members receive free membership in the Hertz #1 Club Gold.

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British MPs are Having a Fit Over Store Card Interest Rates

Private label store card giant GE Consumer Finance, and other retail credit card issues in the UK, are coming under fire for continuing to charge interest rates as high as 32.5%, even though the Bank of England base rate has dropped to 3.5%. According to today’s issue of CardFlash International, the Office of Fair Trading this week called the rates “extortionate” and has launched an informal inquiry into retail credit cards following complaints from Members of Parliament. The OFT suggested that stiff fines could be imposed on the issuers. The OFT will grill bank industry leaders in a hearing next month. Several weeks ago, the Treasury Select Committee held a hearing over retail credit cards and accused the industry of “highway robbery” given that the Bank of England base rate has fallen from 7.0% in 1999 to 3.5% currently. The Commons Treasury Select Committee found that the average rate of interest for retail cards is about 29%, and is relatively unchanged since 1999. The highest rate of 32.5%, was charged for the Toys ‘R’ Us credit card.

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Siebel Service Drives Viseca Card Services Expansion

Viseca Card Services says it has acquired an additional 100,000 customers following its deployment of Siebel Service. The introduction of multilingual customer service best practices among 100 contact center agents has enabled the leading Swiss credit card issuer to resolve up to 95% of inquiries at the initial point of inquiry, answer 80% of calls within 15 seconds, and reduce the lost call ratio to below 10%. By transforming the service experience of its existing 890,000 customers, Viseca has been acquiring more customers and is maximizing customer satisfaction and loyalty. Prior to implementing Siebel Service, Viseca’s systems tracked customers through credit card numbers rather than through the customer.

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