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Conference 7.286::dcu

Title:	DCU
Notice:	1996 BoD Election results in 1004
Moderator:	CPEEDY::BRADLEY

Created:	Sat Feb 07 1987
Last Modified:	Fri Jun 06 1997
Last Successful Update:	Fri Jun 06 1997
Number of topics:	1041
Total number of notes:	18759

1015.0. "GE Reward Card Implementing Fees" by SLOAN::HOM () Thu Sep 12 1996 09:07

GE Will Charge Cardholders Who Pay Off Balances Monthly

By LAURIE HAYS Staff Reporter of THE WALL STREET JOURNAL

General Electric Co.'s Rewards Mastercard, trying to encourage customers
to carry balances on their credit card, will begin charging $25 a year
to those who pay off their balance every month, while lowering revolving
interest rates to 11.9% from the current 17.15%.

GE's credit-card unit said the fee is necessary to offset operating
costs of its popular cash-back program.  Some analysts speculated that
GE risks alienating its highest net worth customers with a thinly
disguised annual fee, although others said it could encourage other
credit-card issuers to resume charging yearly fees.  GE hopes that the
loss in revenue from customers who switch to other cards will be more
than offset by increased interest income from customers who carry
monthly balances.

Some analysts are skeptical that the strategy, which was first reported
in USA Today, will work.

"Maybe GE might be happier, but I think they're going to lose on a net
basis the revenues that come to those accounts," says George Salem, a
senior analyst with Gerard Klauer & Mattison & Co.  "It's a little
risky.  People like me will just take their scissors to the card."

Still, with the market for credit cards more competitive than ever and
profit margins falling, some analysts think GE's attempt to break out of
the pack could spark similar strategies from other card issuers.  If
others follow suit, it would mean the card industry has come full
circle, abandoning the notion of the no-fee card that has become
prevalent this decade.  It could also level the playing field for
American Express Co., which has been criticized and lost market share
for the fees it charges convenience spenders, or those who pay off their
card every month.

So far, no other card companies have announced similar plans.  It is
likely, however, that banks and others will find ways to penalize the
rapidly growing number of convenience spenders, predicts Robert
McKinley, publisher of RAM Research Corp.  They now comprise 36% of all
credit-card spending, up from 29% in 1991, according to RAM, based in
Frederick, Md.  "As baby boomers shift spending from cash to plastic,
this group is only going to get larger," predicts Mr.  McKinley.

A GE spokesman says only 20% of its customers -- whom RAM estimates at
3.7 million -- pay off every month and will be affected by the charge.
Mr.  McKinley figures that GE comes out significantly on the losing end
with those customers.  If a customer, for example, spends $10,000 a year
on the card, paying it off every month, GE gives him a rebate of $140,
while the holder has generated only $80 in interchange revenues, a loss
of $60 for GE.  In addition, GE will have spent $25 to process the card
charges.

            Copyright � 1996 Dow Jones & Company, Inc. All Rights
                                 Reserved.

T.R	Title	User	Personal Name	Date	Lines
1015.1	also mentioned in yesterday's Globe..	SUBSYS::SUNDARESAN		`Thu Sep 12 1996 13:29`	16
	I read about this in yesterday's Boston Globe. The way I see it, that hypothetical "charge 10K per year, pay no interest" person still comes out ahead - his annual GE cashback just dropped from $140 to $115. This still beats the only other cashback card that I'm aware of, i.e. the Discover card. Purely for convenience, though, I myself have switched to the DCU Visa (debit-like "credit") for most purchases. I like being able to log and keep track of both credit card expenses and personal checks in one place, i.e. my checkbook.. it also helps when I don't get hit with a huge credit card bill at the end of the month :-) - Ganesh.
1015.2	Still the best deal of which I'm aware...	SMURF::STRANGE	Steve Strange, UNIX Filesystems	`Thu Sep 12 1996 16:39`	16
	re: .0, .1 As a GE card holder, I went through the same thought as .1. $115 on $10,000 in purchases is, of course, 1.15%, which is still a little better than the other cashback card I have, Chase Gold Visa, which pays a flat 1% (no annual limit). So although my initial reaction was to cut up the GE card, I soon realized that this really doesn't change my strategy, which is to get to the $10,000 limit on the GE card then switch over to the Chase Card until the annual cycle restarts. Certainly if they do away with the cash-back incentives entirely, the DCU check card becomes attractive. Actually, going back to using cash for a lot of purchases (say, everything under $40 or $50) would seem attractive -- I like the idea of not being 'tracked' by computers. Steve
1015.3	This 5% really adds up FAST.	CSCMA::BALICH		`Fri Sep 13 1996 10:32`	7
	As a GM cardholder ... I hope they don't change this gimmie. I get 5% rebate on all pruchases up to $1000.00/year to use toward a purchase of a new car and I always pay in full each month. This is the mother of FREE gimmies IMHO.
1015.3	ATT VISA; new charge	PCBUOA::KRATZ		`Mon Apr 28 1997 18:24`	16
	Kind of, sort of, not really related to the GE card... but I just noticed the AT&T Visa card will be implementing a "service charge" of $20 if you don't mail in the minimum payment (typically $10) by the due date. This, of course, in addition to charging you interest in your outstanding balance and all new purchases. Now AT&T can pull the old we-accidentally-dropped-your-payment-on- the-floor-and-when-we-picked-it-up-a-few-days-later-it-was-past-the- due-date if you don't mail it return receipt requested. Is this $20 penalty something new in the industry, or do others (DCU Visa?) have this now too? Curious... Thanks, Kratz
1015.4	ever higher fees	PASTA::HO	Like money in the bank	`Mon Apr 28 1997 19:32`	25
	Late fees are pretty common. However, banks have been raising them, and also getting more agressive about them. In the past year or so, a whole slew of banks, including some of the biggest (Citibank, for instance) have increased the late fee from $15 to $20, and now impose it the next day after your payment is due, instead of 15 days after. DCU's VISA has a late fee of $5.00. Many of these banks accept electronic payments through PC Branch, including AT&T, Citibank and Discover, and they seem to be pretty good about posting payments. My AT&T payment always shows up on the next day as "ELECTRONIC PAYMENT - THANK YOU." Also, if you have a PC Branch record, and the payment gets lost, CFI or DCU will usually help out. PC Branch generally promises two-day posting for electronic payments, and they don't get lost in the mail as much. Card companies are getting quite creative with the fees, especially the punitive ones, which people don't pay as much attention to. Another common practice is abruptly raising the interest rate to 20+% if a credit report indicates you are late, or even just have too much debt, with -someone else's- card. Incidentally, AT&T lets you check your balances online (with a mailed-out password). http://www.att.com/ucs Sam
1015.5		PCBUOA::KRATZ		`Tue Apr 29 1997 12:52`	3
	Wow, thanks Sam, I didn't realize they were that commmon (and the DCU again looks better and better all the time). K
1015.6	leave home without it?	SLOAN::HOM		`Tue Apr 29 1997 14:29`	6
	I'm at a hotel and just picked up an American Express Card application. Their gold card is the greater of $20 or 2.5% of the balance to the maximum permitted by state law. Gim
1015.7		12429::RMULAC.DVO.DEC.COM::S_WATTUM	Scott Wattum - FTAM/VT/OSAK Engineering	`Wed Apr 30 1997 12:27`	4
	As I recall AMEX doesn't want you to carry a balance with them, so they really go after you if you're late. --Scott