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Credit Card Business Model Tested In Current Downturn

Discover Financial Services, facing the demand for added funding while profits are diminishing and credit card charge offs are amplifying, received only a indifferent response from the equity market as a public offering last week of its ordinary shares had to be priced at a 12 percent markdown to the market.

Right now there is a great deal of risk aversion when it comes to credit cards, said Dan North, chief economist at Euler Hermes ACI, a trade credit insurance firm.

The credit fright started last fall. As a result, people have begun employing their credit cards less, meaning less interchange proceeds from transactions. The credit card firms have also become watchful, carving credit lines, hiking up fees and altering interest rates from fixed to changing, both in response to the need for more revenue now and to prepare for the restrictions from the Credit Cardholders Bill of Rights, which goes into effect next year.

According to North, Discover cardholders have fragile credit ratings, on a whole, than holders of MasterCards, Visas and American Express cards, though those companies are struggling the same financial challenges.

All of those factors have also made it difficult for a new competitor in the market, Revolution Money, a payment platform complete with credit card and money transfer service designed to compete with major card companies Visa, MasterCard, Discover and American Express. Revolution LLC, headed by AOL founder Steve Case, had hoped to compete mainly by offering better security through a chip-based card and lower interchange fees to merchants.

A group of niche players that are getting more traction now, according to a Scripps Howard News Service report, is peer-to-peer lending (P2P), which entirely goes around traditional financial institutions. P2P lending services bundle pledges from individual investors and offer small loans to other individuals at attractive rates, a model that could evolve into direct competition for credit cards.

Mallory Megan works for Rapid Recovery Solution and writes articles on new york collection agencies.

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When A Bill Collector Is On The Phone, A Methodical Approach Is Best

July 16, 2010 · Collection Agencies, Credit, Credit Cards, Credit Score, Debit Cards, Debt, Debt Management, Debt Negotiation · (No comments)

Eliminate Debt Fast Without Bankruptcy Or Debt Consolidation

If a collections agent is on the line, your immediate reaction might be to ignore the phone calls. Seems easier to do things that way right? But if you owe debt to a creditor, collection agencies are allowed to contact credit bureaus and report the debt, file lawsuits against you, and should be taken very seriously. Rather than ignore the phone calls, take them head on with a methodical approach. Your first step is to determine why you are being called. Find out where the debt comes from and exactly how much you owe.

While you have your collections agent on the phone, ask for their name, the name of the agency, the name of the creditor, the agency’s address, and their fax number. Keep in mind that you have the right to tell a debt collector that you want all future contact to be in writing over the phone, but follow up all requests you make with a written request.

One important thing to remember is that if you request that the collection agent doesn’t contact you at all, the debt collection agency has the right to contact you one more time to let you know how it plans to take further action. If you have issues with personal privacy, you can also request that you be the only person who can be contacted. A good idea is to start a file with details and dates of phone conversations and records of when you mail out letters.

If you do mail any letters or checks to the debt collection company do this by Certified Mail, Return Receipt Requested. This way you will be certain that the letter reached the collector because you will receive a signed receipt as proof. If you are able to negotiate a re-payment plan over the phone, request the terms of the plan be sent to you in writing. Any offer that a debt collector makes to remove or adjust credit history should also be documented.

Be certain that you are paying the right people. Payments are usually made to the agency, not the creditor, unless you are otherwise instructed to do so. Glance over the amount that they are asking you to pay carefully, and get an assessment of any interest, fees or charges that have been added on. By taking this methodical approach, you will feel more empowered and ready to tackle your financial issues.

Mallory Megan works for Rapid Recovery Solution and writes articles on credit collection agencies.