Credit Cards » Credit Card News » Credit Card Companies Going for Premium Customers to Survive
Date May 10, 2009

Credit Card Companies Going for Premium Customers to Survive

Credit Card Companies Going for Premium Customers to SurviveWith the state the economy is in now, it is of no surprise that credit cardholders are changing their spending habits, avoiding unplanned buying, and generally preferring to use cash instead of their credit cards whenever they have to buy. Credit card companies are getting hit hard by this complete reversal of American buyers’ consumer habits, which used to follow the mantra “buy, buy, buy”.

With the decrease of credit card use among credit cardholders, credit card companies are losing one of their biggest earners. In general, credit card companies usually get most of their earning through three pathways. These are through customer transactions, revolving credit, and through premium credit card accounts. Since consumer buying has dropped recently and most of them prefer to use cash rather than their credit cards to make purchases, credit card companies are losing credit card transaction earnings. The consumer smart spending trend, partially spurred by the increase in interest rates that credit card companies have implemented, has also meant that revolving credit is no longer a big earner for credit card companies. As a result, credit card companies nowadays are eyeing the premium credit cardholders as their way out.

In a recent summit held in India, it was suggested by Mastercard Worldwide that one way to boost activity for the credit card market may be to charge annual fees. Mastercard Worldwide has been having difficulties continuing its growth with the recent state of the economy. However, Mastercard acknowledged that the only viable market for credit cards with annual fees would be the high end cardholders.

Mastercard may actually be coming late in the game. Competitors Citibank, Standard Chartered, Deutsche Bank, and ICICI bank have already beat them to it. Citibank is known for their Platinum Select Card; Standard Chartered and Deutsche Bank have a partnership going with Emirates Airline, and ICICI Bank is currently partnered with Singapore Airlines.

More and more banks are beginning to see that continued profitability lie in the direction of premium cardholders. Banking insiders recognize that the premium credit card market is better prepared to keep up with their credit card payments and understand much better the need for annual fees.

It seems that, for the moment, banks and credit institutions are going to be marketing aggressively towards the premium cardholders’ market. Most of them are now seeing this market as the best way to continue their growth in the current economic climate. However, bank and credit institutions are acknowledging that the selection process for premium cards is much stricter compared to regular credit card lines. Banks take into consideration several factors before considering an applicant such as educational level, employment industry, annual salary, and their credit history.

Date May 5, 2009

Savings Get Bigger At Dunkin’ Donuts and the US Postal Service from MasterCard

Cardholders who participate in MasterCard’s “MasterCard Easy Savings Program” now have two more options for saving money. The latest merchant enrollees include the United States Postal Service and the national retail chain of Dunkin’ Donuts. Eligible card holders who have been enrolled in the program will automatically save 5% on all purchases made through Click N’ Ship, which is available through the United States Postal Service’s website at www.usps.com, where consumers can purchase supplies, print shipping labels, and order or print postage from the comfort of their own home. Customers shopping at Dunkin Donuts will receive a 5% rebate on every purchase made at a Dunkin’ Donuts location, regardless of the item.

The additional rebates received by card holders at these locations are a benefit to participating in the MasterCard Easy Savings Program. The program not only has advantages for the card holder but the merchants involved in the program also find that they benefit from their involvement. The rebate incentives create more buzz about the business and does help them to generate increased revenue. There is also an attraction for new customers who are already members of the program but do not shop at those merchants regularly.

It is estimated that card holders who are members of the MasterCard Easy Savings Program spent up to 60% more at program-enrolled merchants. 70% of eligible members are new customers for MasterCard. That means that the draw of the program is strong for both the card company as well as participating merchant store. And with the state of the economy, customers are certainly more apt to shop where the savings are even if it means shopping at new locations. As many credit card companies are pulling back on the roads extended to their customers, those that continue to offer rewards programs, particularly cash back rebates for using the card continue to thrive.

Date April 29, 2009

Visa Commercials Promote Debit Cards

Visa has noticed the trend of increased debit card use during this recession. They’re running several TV ads that promote Visa debit cards for everything from buying pizza, going to an aquarium with your daughter on a Tuesday, and paying for products online.

On April 29th, Visa Inc. reported that their branded debit card total dollar volume of purchases surpassed credit card purchases for the first time during the last three months of 2008 – making the debit card transactions processed by Visa 50.4% of their total transaction volume in the same period.

It’s no mystery why consumers are turning to debit cards over credit these days. Consumers are becoming more conscious of their spending, and people don’t want to rack up any more credit bills if they can help it. Debit cards are popular over cash use, because American consumers have a preference for the convenience plastic provides – beginning in 2003, credit and debit card purchases bypassed cash and check purchases.

“A big group of consumers like the discipline that debit spending can bring them, and that is particularly relevant in this kind of environment,” said Tim Murphy.  Murphy looks after MasterCard Inc.’s main payment products.

Unlike credit cards, which allow consumers to charge more than they can afford to pay when the statement comes and carry the balance from month to month, debit cards only let you spend what you have in your checking account. A Nilson Report provides data for the increase of debit cards since 1987:

nilson

Banks are helping to encourage debit card use through the offering of rewards programs. While debit card rewards programs are not as generous as most credit card programs – it’s still a good incentive that helps people choose debit over credit. Credit card use is expected to decline even more, as Americans continue to monitor and rein in their spending habits.