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  • Visa Wins Debit Card Business, with Higher Fees

    The New York Times and Frontline have put together a joint series on the credit card industry , and the latest article runs in today's Times. Andrew Martin writes about how Visa took the lead in the debit card game by pushing prices up: Competition, of course, usually forces prices lower. But for payment networks like Visa and MasterCard , competition in the card business is more about winning over banks that actually issue the cards than consumers who use them. Visa and MasterCard set the fees that merchants must pay the cardholder’s bank. And higher fees mean higher profits for banks, even if it means that merchants shift the cost to consumers. Seizing on this odd twist, Visa enticed banks to embrace signature debit — the higher-priced method of handling debit cards — and turned over the fees to banks as an incentive to issue more Visa cards. At least initially, MasterCard and other rivals promoted PIN debit instead. As debit cards became the preferred plastic in American wallets, Visa has turned its attention to PIN debit too and increased its market share even more. And it has succeeded — not by lowering the fees that merchants pay, but often by pushing them up, making its bank customers happier. Read How Visa, Using Card Fees, Dominates a Market here .

  • Federal Reserve Pushes New Rules to Protect Credit Card Users

    The Federal Reserve is proposing new rules to strengthen Truth in Lending regulation. And , according to the Fed, the new rules would: Protect consumers from unexpected increases in credit card interest rates by generally prohibiting increases in a rate during the first year after an account is opened and increases in a rate that applies to an existing credit card balance. Prohibit creditors from issuing a credit card to a consumer who is under the age of 21 unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so. Require creditors to obtain a consumer's consent before charging fees for transactions that exceed the credit limit. Limit the high fees associated with subprime credit cards. Ban creditors from using the "two-cycle" billing method to impose interest charges. Prohibit creditors from allocating payments in ways that maximize interest charges. Read the Fed's release here .

  • Thaler Wants Banks to Build Customer Base by Building Trust

    Richard Thaler , professor of economics at the University of Chicago's Booth School of Business , studies behavioral economics and finance. So perhaps it isn't surprising that he wants banks to consider building stronger relationships with consumers based on the way consumers behave, rather than making a profit off of consumers' misbehavior (overspending, tardy bill paying, etc.). Building trust with customers likely means lower short-term gains for the banks, but it might also mean longer relationships with better customers. He explains his idea in this BigThink video:

  • Credit Card Rates Up for Most Small Businesses

    If anything, interest rates should be realtively low these days, but a National Small Business Association survey shows that 63% of small business owners have had the interest rates on their credit cards go up in the last year. As BusinessWeek notes , this has come at a time when small businesses are highly dependent on credit cards: As we’ve noted before, credit cards have replaced business loans for many small companies. Most business owners aren’t using credit cards for convenience and paying off the balance each month. Instead, they’re using credit card debt to fund operations and investments: 60% of business owners surveyed reported carrying a monthly balance, with 37% carrying $10,000 or more. For one in three businesses, credit card debt accounted for at least 25% of the company’s overall debt. This might help explain the NSBA's pushing a small business amendment to the Credit Card Act of 2009 currenlty working its way through Congress. Read the full NSBA report here .