As more regions prioritize payments sovereignty, France’s Cartes Bancaires (CB) network is working to reclaim some of the market share it has lost to Visa and Mastercard.

The nonprofit network was created in the 1980s as a joint venture among France’s leading banks. However, CB has seen its domestic market share decline from over 90% to roughly three-quarters of card payments. This shift is partly due to the reliability and global reach of Visa and Mastercard’s networks, and partly due to the rise of digital-first financial players.

CB head Philippe Laulanie recently told the Financial Times that the network’s position has stabilized and interest in CB is growing again. Not only does the payments network hope to regain traction in France, but it also hopes to play a leading role in the broader push for greater payments independence in Europe.

“Cartes Bancaires is the French bank network much like an Interlink or Maestro here in the U.S.,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Most of their cards are co-branded, meaning they can run over Visa and Mastercard rails or on the CB bank rails—again, just like in the US.  However, the market share for CB has been shrinking as new fintechs like Revolut and others have driven towards exclusive deals and single-network architecture.”

Challengers and Competitors

UK-based Revolut has experienced meteoric growth, becoming a global fintech phenomenon. The company has set ambitious goals, including reaching 100 million customers by 2027 and expanding into 30 new markets by 2030. Revolut recently announced plans to establish a Western Europe headquarters in Paris and signaled that it will apply for a banking license.

Alongside fintech challenger like Revolut, CB also faces competition from emerging payment rails like digital assets—including euro-backed stablecoins and potentially the digital euro—the bank-backed Wero digital wallet, and prospective Europe-wide real-time payment systems.

An Off-the Shelf Alternative

Many of these newer rails have gained favor because the EU is increasingly searching for ways to reduce reliance on foreign payment systems. U.S.-based infrastructure, led by Visa and Mastercard, currently processes over 60% of card transactions in Europe.

Given recent geopolitical tensions and ongoing uncertainty, EU leaders have called for changes to the region’s payments infrastructure. This could potentially create an opportunity for CB.

“The political climate is now flashing a yellow light about over-dependency on US-based Visa and Mastercard, with the EU central bank pushing to bring a new network online by 2030,” Apgar said. “CB is already built and operating and could be extended in other EU countries as an off-the-shelf alternative to Visa and Mastercard.”

The post France’s CB Payments Redoubles Efforts to Vie with Visa and Mastercard appeared first on PaymentsJournal.

After processing more than 106 million disputes last year, Visa is rolling out new AI tools to tackle a growing—and often understood—problem.

Many of these disputes arise from unrecognized, but often legitimate, charges on consumers’ increasingly complex statements. This surge represents roughly a 35% increase over the past six years.

To address this pain point, Visa is launching six AI-driven tools. Three are designed to help issuers better analyze and centralize dispute data, while the other three focus on merchants, aiming to improve a longstanding challenge: data sharing between merchants and card issuers. 

“The legacy chargeback and dispute process was designed around consumers working with their card issuers and merchants working with their acquirers,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “At the same time, legacy data formats like ISO 8583 were designed to be compact for fast communications. They only allow 23 characters to be transmitted for the merchant descriptor, with no supporting info on what was purchased.”

“As consumers use cards more and more, monthly statements are typically multiple pages and consumers are challenged to remember where they shopped and what they bought,” he said. “With cryptically brief merchant descriptors and no purchase details, consumers frequently click on the ‘dispute this charge’ button next to an unremembered in their bank’s mobile app, hoping the card issuer can provide the details.”

Timed-Out Inquiries

In the current model, issuers often lack direct access to key transaction data. Compounding the issue, retrieving the information requires a complex chain of communication among the acquirer, merchant, issuer, and ultimately the consumer.

“This whole process runs on a short time window in order to provide good service to the cardholder,” Apgar said. “If the response process isn’t completed in time, the default is a chargeback to the merchant and the consumer gets reimbursed for the purchase.”

“The result is that chargebacks are increasing, simply because the legacy process is being overloaded,” he said. “Many of these chargebacks get classified as friendly fraud, where the consumer intentionally tries to evade a valid sale. And in fact, some of them are, but many are simply the result of timed-out inquiries.”

Piloting an Answer

Because many steps in the dispute process are still manual, the current system struggles to scale alongside the increasing volume of credit card transactions and disputes.

“The answer is to build a process where card issuers can communicate directly with merchants to obtain more detailed info about who the merchant is and what the consumer bought there,” Apgar said. “There are number of different models being piloted now, including a shared database where merchants upload info for access by issuers and an API hub that enables issuers to query merchants and for merchants to provide automated replies.”

“Issuers can also use this data to proactively expand their cardholder statements and head off inquiries from consumers by providing detailed purchase info upfront,” he said.

The post Visa Streamlines Credit Card Disputes with New Tools appeared first on PaymentsJournal.

Co-branded credit cards are a mainstay in today’s payments landscape, but how many do consumers actually hold? Recent data shows a wide range of engagement: just over half of cardholders stick with a single co-branded card, while a notable share carry multiple, with some managing portfolios of six or more. This distribution highlights differing approaches to brand loyalty, rewards optimization, and credit usage. Examining how many co-branded cards consumers own offers a useful lens into how deeply these partnerships resonate and how actively consumers are leveraging them in their everyday spending.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Databook 2026

Co-Branded Credit Card Ownership Distribution

• 52% of those with one card
• 19% of those with 2 cards
• 18% of those with 3-5 cards
• 12% of those with 6 or more cards

Source: Javelin Strategy & Research, North American PaymentsInsights 2025

About Report

The credit card industry has continued its upward trajectory despite earlier concerns that growth might plateau. In 2025, purchase volume climbed to $1.28 trillion, reinforcing cards as the preferred payment method for many consumers. At the same time, certain signals warrant attention, including declining personal savings rates that may point to heavier reliance on credit, as well as potential regulatory changes that could affect the sector’s future.

This annual report from Javelin Strategy & Research provides a comprehensive look at the current landscape. It explores how consumers across the United States are using credit cards, with detailed insights into demographic trends and key performance indicators to help gauge the market’s direction.

The post How Many Co-Branded Credit Cards Do Consumers Really Carry? appeared first on PaymentsJournal.

Once the domain of luxury cardholders, metal cards have evolved into a global phenomenon. Ironically, one of the driving forces behind this momentum has been the rise of digital payments—prompting more consumers to seek out a tangible payment device that conveys prestige. A mix of cultural and behavioral factors is also fueling the worldwide demand for metal cards.

In a recent PaymentsJournal webinar, IDEMIA Secure Transactions’ Kate Eagle, Head of Growth and Innovation, Payment Services, and Hennie Duplessis, SVP of Payments Services, MEA, along with Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the drivers of metal card adoption across different markets and the lessons global issuers can draw from regional trends.

Singing the Right Song

The global metal card market has been growing at leaps and bounds. Although regional dynamics vary, several overarching trends are shaping the industry.

Competition has intensified as more players enter the space. The rise of fintechs, telcos, cryptocurrency wallets, and embedded finance providers has prompted many financial services companies to rethink their strategies.

Amid this surge in digital payment options, there has been ongoing debate about whether digital payments will eventually replace physical cards altogether. Yet rather than signaling the end of physical cards, this evolution has reshaped consumer preferences.

“The need to stand out and differentiate is becoming increasingly important because the competition is changing, and the competition is growing,” Eagle said. “The context is very different now. If you look at the digital influence in the world, metal cards have got the unique ability to go viral. If you go to Instagram and type in metal payment cards, it’s everything from unboxing experiences to talking about the perks that you get with certain cards.”

“Whether it’s the travel perks, the loyalty rewards, or the concierge services, these are all projecting an aspirational lifestyle,” she said. “It’s not just reflecting a high-net-worth or an ultra-high-net-worth lifestyle, but it’s singing the right song to the people that have got this aspirational lifestyle that want to be able to show off.”

While the appeal of metal cards is nearly universal, certain aspects resonate more strongly in specific markets. For instance, in many Middle Eastern countries, metal cards have long been associated with prestige and trust—qualities that hold particular importance for consumers in the region.

“Markets like the UAE, the Kingdom of Saudi Arabia, Qatar, Kuwait, all are incredibly competitive when it comes to payments,” Duplessis said. “These are complex, layered societies where financial needs and expectations differ quite a lot—not just by wealth—but also by things like cultural background, status, professions, religion, and lifestyle.”

“Over the last five to 10 years, banks in the region have become very sophisticated when it comes to how they segment their customers,” he said. “They’ve moved away from these wealth tiers to include things like behavior and digital adoption and different kinds of insights. It’s quite an interesting dynamic and we see a lot of potential going forward.”

Carrying Weight Across Markets

Outside of the Middle East, less traditional markets like Pakistan, Southeast Asia, and several African countries have also become key players in the metal card zeitgeist.

“Let’s look at Pakistan,” Duplessis said. “It’s a country with a high level of financial exclusion, but the payment landscape is being transformed by digital banks and telcos. For the traditional banks to stay relevant within this fast-moving digital landscape, the conventional banks are using metal cards to get back some traction on getting customers.”

“Even in this market where you see that it’s very much a digital-first market, the physical plunk factor still matters,” he said. “The sound and feel of a metal card when it hits the surface, it does carry weight—literally and as a perception.”

In Southeast Asia, the tactile and premium feel of metal cards has been a major draw. Following the pandemic and its prolonged lockdowns, consumers in the region developed a strong appetite for tangible, sensory experiences, which has translated into growing demand for physical expressions of status and quality.

In Africa, the drivers have been quite different. Although the region is a diverse continent of over 50 countries, several overarching trends have shaped the rise of metal cards. It is home to one of the world’s youngest populations, with an average age well below many other regions. Urbanization continues to accelerate as more rural citizens move to cities, while rapid advances in digital infrastructure have further connected and empowered these young consumers.

Together, these factors have created a generation that is increasingly aspirational—seeking products and experiences that reflect both success and sophistication.

“These are all prime markets for standout metal cards that are coming bundled with rewards, tailored services, things that people can aspire to and show off,” Eagle said. “These are things they can share and use within their social media and for influencing, and for taking home to their families to show that they’ve achieved something in their lives.”

“It’s a significant shift away from metal cards just being for high-net-worth. It’s this targeted focus on segments that has been the key,” she said.

The One Piece of Real Estate

In contrast, card payments are the norm in the U.S., where credit and debit cards account for roughly $8 trillion in spending per year. Additionally, revolving credit card debt totals around $1.3 trillion, compounded by an average interest rate of 22%, creating a massive U.S. credit market.

This is the market where metal cards were born, and, in many cases, have become an expectation.

“For many of these high-net-worth people and those that are ultra-high, this is just table stakes,” Riley said. “This is what I expect out of a card, and I require it when I do business stuff. When you start looking at the development of luxury cards or high-ticket cards that exceed $300 and $400 in annual fees, that’s a basic core requirement. You don’t even think twice.”

Although metal cards are a core component of premium card offerings in the U.S., innovation in this space continues. There are now platforms that offer metal cards with various weights, compositions, and designs.

This personalization can have a dramatic impact in markets like the U.S., where physical card payments are prevalent. As consumers use their cards frequently, they develop a deeper connection with them.

“Payments are getting more digital every day, there’s no getting away from that fact, but the metal card holds a special place,” Duplessis said “There’s something powerful about this physical feel—the weight in your hands—and it signals trust, prestige, and belonging. It’s emotional; it’s not just functional.”

“Even if not entirely logical, many people still feel their money is somehow safer when there’s something tangible attached to it,” he said. “In a world where everything lives in the cloud, it’s that one piece of real estate that you have attached to the financial world.”

Because there are a range of reasons why global consumers are attracted to metal cards, financial institutions must consider these nuances when implementing their metal card strategies.

“What we’ve learnt over the years is that banks need to have flexibility in terms of what they can do with a metal card,” Eagle said. “What we’ve learnt is that we need to be able to offer a customizable metal card platform and not just a one-size-fits-all, where every metal card is the same composition with the same features.”

“Having this menu of things that you’re able to do with a metal card talks very well to the banks who want to be able to segment at a more granular level,” she said. “I’m in the UK, and we produce diamond-encrusted metal cards for royalty, and we have entry-level metal cards for the youth and aspirational segments. The point is that metal cards can serve many segments, not just the most privileged.”

The Origins of Money

One key lesson that financial institutions can take from global metal card adoption trends is the importance of customizability. Issuers should develop a portfolio that offers a variety of metal card designs, allowing them to differentiate between customer segments—from aspirational users to high-net-worth.

Financial services companies should take a tailored approach with the aspirational segment, which largely consists of younger consumers. These customers are more likely to join a waiting list and pay a premium for a distinctive metal card they can show off—especially if the card offers capabilities beyond traditional payments, such as digital or crypto functionality.

Rewards are another critical factor in the success of metal card programs. Banks should consider segmenting their loyalty offerings as well. For example, perks like fast-track concert tickets and concierge services may appeal to younger users, while older customers may prioritize air miles or cash-back rewards.

Banks that strike the right balance in their metal card programs can instill a sense of status, stability, and timelessness in their brands.

“It makes me think back to the origins of money, and what is a banknote?” Eagle said. “The original conception of a banknote was that it was a promise to pay. For me, that’s what (a metal card) is. It’s representing a promise—it’s a tangible link to your life savings or to your salary or to your ability to obtain credit and pay. it’s a promise to be able to live your life.”

“Everything the physical card represents is a lot more solid when it is, in fact, solid,” she said. “It’s a tangible direct link to the brand of the bank and the trust that we have in them, the promise that they are looking after our money safely, that they are going to pay, that they are going to back up all the things that we need to do in our daily lives. This is so important in this increasingly competitive financial services environment.”

The post Why More Global Consumers Are Aspiring to Unbox Metal Cards appeared first on PaymentsJournal.

Economic conditions often play a major role in how consumers manage credit. Changes in interest rates, inflation, and household finances can influence when people decide to apply for a new credit card. Whether consumers are looking for better rewards, lower borrowing costs, or more financial flexibility, broader economic trends help shape those decisions.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Databook 2026

Important Economic Factors in the Decision to Apply for a New Credit Card

• 73% – No annual fee
• 67% – An attractive points/rewards program
• 64% – The card had strong fraud protection features
• 63% – Good credit line
• 58% – Low APR (interest rate)

About Report

Credit card usage in the United States continues to expand, even as some observers have questioned whether the market was nearing saturation. In 2025, total purchase volume climbed to $1.28 trillion, reinforcing credit cards’ position as the most widely used payment method among consumers. At the same time, several indicators suggest areas to watch, including persistently low personal savings rates that may signal heavier dependence on credit, as well as potential regulatory proposals that could affect the industry if passed.

This annual report from Javelin Strategy & Research provides a comprehensive look at the U.S. credit card landscape. It analyzes how consumers are using credit cards today and examines trends across key demographic groups and market indicators to offer a clear picture of the industry’s current state.

The post Top 5 Economic Factors That Drive New Credit Card Applications appeared first on PaymentsJournal.

Visa has been the sole card provider for the Olympic Games for roughly 40 years, but its dominant positioning has become a point of concern at this year’s Winter Olympics.

The main issue is that all official souvenir stores at the Milano Cortina games only accept Visa or cash. With cash usage declining across Europe, many visitors without Visa cards have faced long ATM queues to access funds.

While such logistical challenges are not unusual at major events, they highlight Europe’s resilience on foreign payment providers—a dependence that has disquieted many EU leaders. This has fueled increasing calls for a stronger, independent payments infrastructure to reinforce the EU’s standing as a global financial services hub.

“The Olympics has been Visa-only since that marketing deal started way back when, but now they’re shoved into the spotlight because of global affairs, so they are scrambling to install ATMs and let people use cash,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Banks in the EU issue Visa- and Mastercard-branded credit and debit cards just like they do in the U.S; Visa and Mastercard are global brands but are headquartered in the U.S.”

“With everything that’s been happening with NATO, Ukraine, Greenland, etc., now the EU is wondering if their payments system could be at risk if the U.S. does something that makes Visa and Mastercard unavailable to the EU, or at a minimum less desirable for EU banks and consumers,” he said.

A Digital Alternative

Although there is no indication that changes to card networks are imminent, financial services are increasingly a focus for EU lawmakers. The rapid rise of U.S.-dollar-backed stablecoins has also raised concerns about the euro’s role in global transactions.

The emergence of stablecoins has intensified discussions around a central bank digital currency (CBDC). However, progress toward a digital euro has been arduous, with ongoing debates about security and the necessity of the digital asset.

Despite these challenges, the European Central Bank plans to launch a digital euro by 2029, contingent on establishing an appropriate regulatory framework. If successful, the CBDC could debut just ahead of the 2030 Winter Olympics in France.

Protecting from the Splatter

The EU’s concerns extend beyond Olympic souvenir payments. Lawmakers recently met to discuss a comprehensive payments plan that would include a euro-backed stablecoin, tokenized deposits, and a focus on ensuring that all lending and aid efforts are denominated in euros.

These discussions followed a landmark trade deal with India that carried significant financial services implications. Collectively, these initiatives signal that payments stability is a top priority for EU leaders.

“There’s also nervousness in the EU about U.S. debt at $31 trillion and growing fast, based on tax cuts and spending in the U.S. right now,” Apgar said. “Many U.S. bondholders are EU countries who are unwinding their U.S. investment positions. Combined with tariffs, Iran, Venezuela, and Gaza, some EU economists are becoming bearish on the U.S., and if our economy hits the deck, the EU is trying to protect themselves from the splatter.”

The post Olympics Payments Hurdles Are a Microcosm of EU Challenges appeared first on PaymentsJournal.

Using debt to fund gambling activities is a highly risky proposition, even more so when transaction fees are involved. That’s why online betting giant FanDuel will no longer allow customers to fund accounts with credit cards.

The ban will apply to the company’s U.S. sportsbook, casino, and racing segments and follows mounting industry pressure and regulatory scrutiny. Senator Elizabeth Warren recently urged the company to halt credit card payments, noting that nearly a quarter of American bettors used credit cards to fund their accounts and that many incurred fees as high as half of the original wager.

Rival online betting platform DraftKings cited these fees as the main reason it stopped accepting credit card payments last year. Funding a gambling account with a credit card is often treated as a cash advance rather than a purchase, allowing interest charges and fees to accumulate quickly.

“This is actually a win-win for both FanDuel and consumers,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “For FanDuel, they get some modest per-transaction cost savings, which add up over time. And they can utilize the stored-value accounts to encourage responsible play, but also to incent and reward new deposits at rates less than the transaction and interchange fees.”

“For the players, they can continue to play and use readily available funds, meaning they will not be incurring credit card debt to fund their gambling activities,” he said.

Incentivizing Betting Behaviors

FanDuel’s stored-value accounts exemplify a model that has reshaped a prepaid industry once centered largely on gift cards. In effect, these accounts function like digital gift cards purchased for self-use. Such products have surged as more organizations recognize the pivotal role stored-value accounts can play in loyalty and rewards programs.

Amid the broader expansion of the prepaid market, digital gaming and gambling have emerged as standout segments. This growth is partly driven by platform incentivizes, including deposit matches and rewards tied to specific betting behaviors.

Gambling on Prepaid

Beyond loyalty optimization, there is a more practical factor behind the digital gaming and gambling market’s recent growth: legalization. Now that online betting is legal in 32 U.S. states, the pace of expansion may begin to moderate as the market matures.

Still, the elimination of credit card payments by the two leading U.S. online gambling platforms is likely to keep digital gaming and gambling among the top prepaid segments. While some gambling platforms still permit credit card deposits, that option may diminish. Eight of the 32 states have already banned credit card funding for betting platforms, and additional states could follow.

The post After FanDuel Cuts Credit Cards, Stored-Value Accounts Take Center Stage appeared first on PaymentsJournal.

Despite recent contention over interest rates and transaction fees, credit cards remain firmly entrenched in the U.S. payments landscape. To capitalize on this ubiquity, Bank of America is undertaking a credit card revamp aimed at driving profits to new heights.

A central force behind this overhaul is artificial intelligence. The bank plans to leverage AI to identify and attract new customers, while also encouraging existing clients to deepen their relationship with Bank of America.

Another key aspect of the redesign is offering tailored incentives to customers with higher account balances, a strategy long favored by credit card issuers.

“Bank of America’s strategy to further their rewards program with incentives on customer deposits enhances their strategy to leverage the credit card as a comprehensive tool for customer management,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “It expands a program they deployed for the past couple of years, and the timing is right.”

“Instead of simply associating rewards with card purchases, it considers deposit relationships and adds point accelerators,” he said. “This allows the issuer to add incremental value to consumer deposits and reward customers for their banking relationship. It is not new to Bank of America, and the functionality has been proven in the field.”

Squeezing More Value

Recent years of high inflation and interest rates have pushed consumers toward credit cards, driving balances upward and prompting issuers to tighten lending standards, lower credit limits, and prioritize stable customers.

“The timing is perfect from two perspectives,” Riley said. “First, it targets premium and luxury cardholders that pay large annual fees, such as Amex Platinum, Chase Sapphire, and Citi Strata. Secondly, with pressure on credit card rates looming, it is a way to squeeze more value out of the relationship for both the issuer and the cardholder.”

More Than Risk Mitigation

While interest rate pressures are not inevitable, many banks are preparing for a potential 10% cap on credit card rates. However, Bank of America’s strategy extends beyond risk mitigation The company has set an ambitious target: growing its customer base from 69 million to 75 million in four years.

One approach is using AI to gather deeper insights about prospective customers and deliver personalized offers at pivotal life moments, such as marriage or purchasing a home.

Ultimately, Bank of America aims to provide individualized underwriting for each customer. Once achieved, the bank has another ambitious goal: raising consumer unit profits to $20 billion—something that has only been accomplished twice in U.S. banking history.

The post Bank of America Overhauls Credit Card Program to Boost Customer Base appeared first on PaymentsJournal.

India has become a nation known for financial innovation, with the widespread adoption of the UPI payment system and new approaches to lending and insurance that have helped democratize personal finance. But one area that has lagged behind is the credit card sector. Today, there are roughly 50 million credit card holders in India—seemingly a large number until you consider a population of nearly 1.5 billion. By contrast, the U.S., with about one-quarter of India’s population, has more than 600 million credit cards in circulation.

“A decade ago, credit cards in India were restricted to the urban, high-end segment,” said Vibhav Hathi, Co-Founder and Chief Marketing Officer at FPL. “It has become much more widespread, but it’s still an aspirational product.”

In a market where many consumers are still deciding whether they need their first credit card, it’s understandable that an aspirational metal card once seemed far-fetched. When FPL first explored the idea, plenty of people warned it wouldn’t fly.

But fly it did. With the help of CompoSecure, the FPL card not only succeeded but carved out an entirely new market by bucking conventional wisdom.

Finding a Differentiator

Given that India has more than a billion people without a credit card, there was clearly room for a new entrant.

“India is a terrific country for payment cards,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The Reserve Bank of India has helped democratize credit cards and enable borrowing in the nation. It is an exciting market, where 15% to 20% annual growth has been common.”

The important question was how FPL’s card could differentiate itself. With 45 cards already on the market, FPL would be entering as the 46th. Competing directly with the country’s largest card issuers made little sense for FPL, which was known for its user-friendly digital credit products developed in partnership with some of India’s major banks.

So how could FPL’s brand stand out? The answer was a physical metal card—attention-getting yet classy, and definitely not your father’s credit card. Hathi and CompoSecure recognized that the card could appeal to a market defined not by a specific demographic, but by a lifestyle.

“Our demographic segment for adopting metal was somebody who was ready to try something new,” said Hathi. “Imagine a 28-year-old software engineer who uses a QR code for a half-dollar transaction. When he or she goes to a fine dining restaurant or goes out with a group of friends, they want to flash something. It gives them a status symbol.

“That’s the demographic,” he said. “Somebody who wants to be the early adopter, somebody who wants to try out something new, somebody who’s known for adopting newer technologies.”

Three Distinct Personalities

CompoSecure further refined this target market into three distinct personas: elites, innovators, and the aspirational.

Elites represent consumers with a certain level of wealth and social status. They tend to be interested in the arts and social causes and respond to messaging around exclusivity, prestige, and scarcity. These customers want a premium feel to their physical card.

Innovators are typically mobile natives—millennials or Gen Z—who respond to messaging centered on innovation and trendiness.

Then there’s the aspirational group, known as HENRYs: high earners, not rich yet. For them, the metal card—long associated with the elite—signals the future status they aspire to.

For all three segments, the metal card elevates the credit card from a rational, transactional product to an emotionally resonant one.

“The card’s weight adds appeal, and the plunk of the metal card on a countertop has a special ring,” said Riley. “When you add in the importance of card branding, particularly as e-commerce overtakes retail sales volume, the payment card itself helps endear the customer to the issuer, and that is also a plus for the metal card.”

Rolling the Card Out

With the decision to launch a metal card made, the next step was to design and roll out the product. FPL needed to ensure that the card was more than a gimmick—it had to be a world-class offering capable of standing alongside the leading products in the category.

To reinforce the distinctiveness of the metal card, FPL created a more tangible, sensory experience. With every transaction, customers received a notification that played a metallic “clink,” echoing the sound of the card itself and adding a multisensory dimension to the brand.

Beyond prestige, metal cards are more durable than plastic, and FPL leaned into that attribute. Sustainability is top-of-mind for many consumers in India. One motorcycle manufacturer, for example, reclaimed metal from a prominent retiring warship and used it to build a limited-edition bike, which quickly became a collector’s item. Hathi wanted FPL’s metal card to evoke a similar sense of meaningful material and enduring value.

“What is the story behind my metal card?” Hathi asked. “Is it bringing purpose to somebody somewhere? Is it recyclable? Is it improving someone’s life?”

Falling in Love

When the card launched, reactions were immediate. Customers fell in love with it, forming an emotional connection that’s rare for a credit card. Some users posted unboxing videos on social media, while others even used the card to slice their birthday cake. They wanted the card woven into every aspect of their lives, creating a level of loyalty that quickly made it their  primary payment choice.

“A consumer would say, ‘Oh, is this an Indian card?’” said Hathi. “They felt proud when they went beyond India, when they were making a transaction at a restaurant and their card felt as good as any other global card. We had a customer who used it at a hundred restaurants, and we asked him why. He said, ‘I became the cool guy. I had something which others did not have.’”

The success of FPL’s metal card was amplified by its partnership with a trusted, experienced collaborator like CompoSecure, which has supported more than 150 different payment card programs. The card’s distinctive look and feel proved to be far more than a branding play—it became a serious business driver, delivering significant ROI along with strong consumer preference and loyalty.

“Metal cards are not a passing fancy,” said Riley. “They are standard-issue products for luxury cards, and they have a broad appeal to younger age groups. Every one of the premium cards in the U.S. market today, things like Sapphire and Platinum and so forth, gravitate towards a metal card, for good reasons, You will be seeing more of them in the years to come.”

The post Defying Expectations: How a Metal Credit Card Found Its Market appeared first on PaymentsJournal.

After much discussion and speculation, JPMorgan Chase has agreed to assume Apple’s $20 billion credit portfolio from Goldman Sachs.

The deal offers benefits for all parties involved. For Goldman Sachs, it represents the end of a rocky foray into consumer lending and a return to its core business. For JPMorgan Chase, the bank will acquire a sizable credit portfolio at a discount while strengthening ties with one of the world’s leading technology companies. For Apple, the arrangement places its credit business in the hands of an established consumer lender.

“The problem here is Apple wanted everybody who had a phone to have a card,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “Goldman Sachs accommodated it for a while, and then it started to blow up and you have these billion-dollar credit write-offs, and Goldman Sachs had to get out of it. Being an investment bank and then trying to move into retail—it was a very different culture.”

Weathering the Transition

To prepare for potential risks, JPMorgan will record a $2.2 billion provision for credit losses when it reports its Q4 2025 earnings. However, as the largest lender in the United States—and soon to be even larger—Chase is well positioned to weather this transition, which is expected to take roughly two years.

“It’s a win for Chase in some ways,” Riley said. “It doesn’t bring in a zillion new customers—Chase is already in one out of two households in the U.S—but it does bring in some good technology. It is a springboard to reach millennials and younger adults, but Chase is often already there. But it increases volume by 10%, and being able to do that, in itself, is important.”

In addition to the increased volume, Chase will acquire the Apple Card portfolio at a discount of over $1 billion. This reflects the portfolio’s higher concentration of subprime and less-than-optimal borrowers.

“Chase is a very conservative lender, and that’s want you want out of the biggest bank in the United States,” Riley said. “They’re not going to carry over the Goldman Sachs standards. You can expect that there are going to be bank-grade lending standards in place, and that’s important.”

That said, Chase has demonstrated flexibility in the past. For example, with its Chase Rise card, the bank has softened underwriting criteria when borrowers open a checking account. The rationale is that consumer who deposit their salaries into a checking account are more likely to be stable, long-term relationships.

A Wobbly Portfolio

While Chase could bring a similar model to Apple’s portfolio, it would still face risks that require a response.

“They can mitigate a lot of the risks by shutting down accounts,” Riley said. “When you start looking at the portfolio and you get down and dirty into it, there’s going to be some pockets they want to grow and there’s going to be some pockets they want to diminish. They can do that systemically and not have the emotion of tying into the old business.”

Cleaning up Apple’s portfolio will require significant legwork on Chase’s part, but this has already been factored into the deal.

“The big thing to point out is usually these deals come with a premium,” Riley said. “This comes with a discount, and that tells you how wobbly the portfolio is. It will take years for that to work its way out of the system, but it’s something that Chase is used to. It’s a very large bank with lots of computer horsepower behind it.”

The post JPMorgan Chase Brings a Fresh Approach to Apple’s Credit Card Model appeared first on PaymentsJournal.

When the latest iteration of the settlement involving Visa, Mastercard, and various merchants was proposed in November, there was speculation that the deal could reshape the credit card rewards model. However, a group of retailers led by Walmart argued that the settlement doesn’t go far enough to create a meaningful impact for merchants.

Under the proposed deal, Visa and Mastercard would lower the credit card interchange fees that merchants have increasingly criticized, reducing fees from roughly 2%-2.5% by about 0.1% for several years.

Perhaps the more impactful part of the settlement is that merchants would gain the ability to decline certain credit cards—particularly high-fee rewards cards—that they were previously required to accept. Still, Walmart and other retailers emphasized that this latest settlement doesn’t sufficiently address the ongoing challenges merchants face.

“What’s being offered to merchants is not really a practical solution, allowing them to not accept higher-cost rewards cards,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “That defeats the purpose of having a shared acceptance mark like Visa or Mastercard—that was the whole power of the brands when they started. For a store to say, ‘We accept some Visa cards, here’s a list of Visa cards we do and do not accept,’ is ridiculous.”

“Retailers don’t want to be put in a position of instituting fragmented payment policies that disadvantage consumers and add friction to the shopping experience,” he said. “Merchants, for the most part, acknowledge that card payments are fast and convenient, but the rising cost of interchange and network fees has damaged the value proposition for merchants.”

Perks with Payment

One of the factors driving calls for change is that rewards cards have shifted from being the exception to the rule. Once the domain of luxury credit cards—such as those issued by American Express—more card issuers have added benefits to attract cardholders.

As consumers have come to expect perks with their payments, rewards programs have become an integral part of the credit card landscape. However, even as consumers enjoy cash back and discounts, credit card companies pass a portion of these costs to merchants. This has intensified merchants’ calls for a reduction in interchange fees.

Overlooking the Benefits

Amid the focus on costs, the substantial benefits of credit cards should not be overlooked. These payment cards have become the dominant form of payment in the U.S., offering consumers flexibility, protection, and efficiency.

The widespread use of credit cards has led to measurable increases in shopping activity and spend per visit at merchants. E-commerce, mobile payments, and contactless transactions have all benefited from their adoption.

What’s more, transaction times at the point-of-sale have been substantially reduced, while the risks and expenses associated with handling large amounts of cash have been minimized. 

“Sadly, the great benefits that branded card acceptance has brought top large-chain retailers are being completely ignored in these conversations,” Apgar told PaymentsJournal. “Cards have been part of our daily shopping lives for long enough that merchants have stopped tracking the benefits and focus solely on the expense of the fees to accept cards.”

The Final Analysis

For their part, Visa and Mastercard have been working toward a solution with merchants for years, even as they continue to deny any wrongdoing. Prior to the November proposal, the two companies reached a $30 billion settlement with merchants last year, which was initially considered a win for retailers.

However, in the final analysis, this settlement only amounted to a 0.07% reduction in interchange fees over five [or several years]. The deal was later struck down by a New York federal judge for failing to provide adequate relief to merchants.

The Walmart-led group has petitioned a federal judge in Brooklyn to reject the latest settlement on similar grounds. Additionally, there are concerns that accepting this settlement could affect other ongoing actions against the card companies.

Impacting the Business Model

The uncertainty surrounding these actions has put many credit card issuers in limbo. If the latest settlement is approved, it could significantly disrupt their rewards-driven strategies, potentially forcing them to scale back on cashback and points programs.

“There (would be) a shift of control at the acceptance point, from the card issuer to the merchant,” Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research told PaymentsJournal. “The big deal to watch is whether cardholders will lose confidence in their card. Consumers may need to have multiple cards in their wallets or purses to ensure the merchant will accept the product.”

“For some large issuers that have strong merchant relationships, this might be a positive,” he said. “But expect chaos for small issuers who might just issue one type of a credit card.”

The post Why Walmart Is Taking the Lead Against the Visa and Mastercard Settlement appeared first on PaymentsJournal.

Recent research from CompoSecure and Capuchin Behavioural Science shows that issuing metal cards is an incredibly efficient way for banks and fintechs to acquire high-value customers, to encourage them to spend using the card (making it top of wallet) and to retain them. Today, the metal card is more popular and more in demand than ever among consumers worldwide. People are captivated by the aesthetics of these cards, the way they feel, their weight, and the distinctive sound they make.

Leveraging Metal Cards to Reinforce the Brand Among Broader Customer Segments

While metal cards were not originally aimed at wider customer groups, their issuance created a positive brand perception across broader customer segments. In today’s banking landscape, where new players continue to emerge, leading to the disintermediation and unbundling of financial services, the way a bank is perceived is arguably more important than ever. There are many ways to enhance this perception, and this research shows that one highly effective measure is including metal cards in the bank’s or fintech’s offerings.

Segmenting the Customer Base to Optimize the Uptake of Metal Cards

The research highlights specific customer segments that are particularly likely to embrace metal cards:

• Elites have considerable financial wealth, a higher social status, and refined interests such as social causes. They tend to prefer traditional banks. ‍
• Innovators are both Gen Z and Millennial customers who are drawn to lifestyle, technology, new trends, and innovation. They typically lean towards fintech providers. ‍
• Up and Coming are young, well-educated individuals (primarily Gen Z) who have already achieved significant professional success and are status-conscious. Sometimes referred to as HENRYs – High Earners, Not Rich Yet.

Immersing the Senses—the Sensory Power of Metal Cards

Compared to standard plastic cards, metal cards stand out by engaging 3 of our senses:

• They look different– sight
• They feel different – touch
• They sound different– hearing

Interestingly, the Elite, Innovator and Up and Coming segments place significantly more value on these sensory attributes than the general population.

Positioning the Metal Card to Maximize Its Impact

Compared to the general population, the aforementioned segments tend to value metal cards as “accessories.” They see the cards as symbols that communicate their values, lifestyle, identity, and status. Using a metal card becomes a form of self-expression. Interestingly, these segments prioritize experiences and emotional connections over mere functionality. It’s also important to note that these groups prefer the exclusivity of metal cards within their select group, reinforcing the successful strategy many issuers have used: offering metal cards (only) to carefully selected segments and/or pricing them with a (significant) premium compared to standard plastic cards.

Using the Right Cues When Communicating About Metal Cards

To truly captivate the Elite, Innovator and Up and Coming segments, issuers of metal cards should carefully consider the cues used in their communication. It’s important to create the impression that these cards are scarce, rare, premium, and unique. This will reinforce the FOMO (fear of missing out) effect and strengthen the sense of exclusivity. It’s also crucial to emphasize that metal cards are rare for a reason: they are (hand)crafted through long and complex processes that require expert skills, advanced technology, and specialized equipment, using rare materials.

Summary

This research highlights how today, metal cards are more popular and more in demand than ever they have been. Consumers around the world are captivated by the aesthetics of these cards, the way they feel, their weight, and the distinctive sound they make. Banks and fintechs can leverage metal cards not only to improve acquisition, spending, and retention among selected segments, but also to enhance the overall brand perception among all customer segments.

The post Leveraging Metal Cards to Attract High-Value Customers appeared first on PaymentsJournal.

In an industry dominated by plastic, metal cards stand out. Their distinctive look, feel, and even sound have drawn in an emerging customer base that sees them as powerful symbols of status and stability. While often associated with affluent consumers, metal cards represent more than just a luxury novelty.

In a recent PaymentsJournal webinar, Amanda Gourbault, Chief Revenue Officer at CompoSecure, Vibhav Hathi, Co-Founder and Business Officer at FPL, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, examined the trends shaping metal cards, their diverse use cases across global markets, and the pivotal role they are poised to play in the future payments landscape.

A Dose of Dopamine

To better understand metal card trends, CompoSecure surveyed over 21,000 consumers across 17 markets. One key finding was that metal cards often make a profound psychological impact on consumers.

“People using a metal card feel valued when they use it,” Gourbault said. “They feel noticed, they feel respected, and those are fundamental human needs. Every time you pay with a metal card, you get another little dose of dopamine which makes you want to keep doing it again. That is one of the reasons why we found that—across all geographies, all segments—87% of respondents would prefer to have a metal card over a plastic card.”

Another reason consumers are drawn to metal cards is that they engage the senses, creating a more memorable and emotionally charged experience. The sleekness, heft, and even sound of a metal card can’t be replicated by plastic cards or mobile payments.

As the world becomes increasingly virtual, a metal card represents security, solidity and durability—qualities consumers have come to value.

This preference for metal cards makes customers more likely to engage with and stay loyal to metal card issuers. In a rapidly shifting industry where e-commerce and digital banking dominate, this can be a powerful advantage.

“As you get away from the retail bank, the credit card becomes your institution’s calling card,” Riley said. “That’s the foundation for a relationship. Establishing that relationship with the metal card adds that cachet and brings it through the whole relationship. Once you get that hook in, people get used to using it and they don’t want to give it up.”

Oftentimes, once consumers start using a metal card, their loyalty deepens and they evolve into brand advocates.

“We have had customers who have taken their metal card and sliced a birthday cake with it,” Hathi said. “They are bringing the card into every aspect of their life. We have so many of our consumers who will unbox the metal card and put it on social media and drive organic traffic to us.”

Tailoring Messaging to Distinct Consumer Segments

Even though there is a strong attraction to metal cards across the board, CompoSecure identified three segments where 90% of respondents said they would choose a metal card over a plastic card: elites, innovators, and up and coming.

A commonality among these segments is that they all prioritize the payment experience over functionality. While there are additional similarities, organizations should tailor their marketing messages to each group.

“When we talk about the elites, it’s not just the ultra-high net worth, although it’s certainly people with a certain wealth and social status,” Gourbault said. “But it also tends to be those who are interested in the arts, interested in social causes, it’s that group. And they respond to messaging around exclusivity, around prestige, and around scarcity.”

Innovators tend to be Gen Z or millennial consumers. Although these younger adults are digital natives, they are increasingly drawn to unique experiences—such as paying with a metal card. To reach innovators, organizations should craft messaging around themes such as trendsetting or even accessorizing.

The third segment consists of up-and-coming consumers, often referred to as HENRYs: High Earners, Not Rich Yet. Their priorities are desirability and aspiration, so companies should adjust their marketing efforts accordingly.

“Each of these three segments has differentiations, but the way they perceive and how they accept the metal card form factor as a differentiator for themselves is unique to them,” Hathi said. “All three feel that the metal elevates the credit card from an aspirational product to something well beyond that—from a rational transaction product to an emotional connection product.”

A Metal Card Pioneer

Just as metal cards can have different meanings for various segments of the population, premium cards can also be perceived differently across markets.

In the U.S., where there are roughly 660 million cards, metal cards are a compelling niche product. In a market like India, where much of the population lacks access to credit, the prestige of a metal card is far more pronounced.

“When we started working with banks to do something different in the credit card market, India was the country where—post the entire UPI and digital revolution—digital payments were the core,” Hathi said. “Consumption became the focus for a young Indian and therefore consumer credit. You add the lure of digital, and it was whatever you do as an innovator should only be virtual. Now, here comes an organization called FPL, and we’ll do a physical metal card.”

Although the company’s flagship product is a metal card, FPL is still a digital-first financial services company. Its goal was simply to bring a tangible experience to a mobile-first card. After an initial foray into a metal card with a high annual fee—a la Chase or American Express—FPL shifted course and offered a free metal card.

This strategy paid dividends and underscored a key aspect of the digital experience: even though consumers need the convenience and efficiency of digital payments, they still crave real world experiences. FPL leveraged this demand to stand out from a large pack.

“There are 45 cards in the industry. If I’m the 46th card enabler, how do I differentiate myself?” Hathi said. “I can go and compete with the large banks through my bank partners and say here’s a 25% discount, but that doesn’t make sense. Getting a metal card was an innovation, and even our detractors tell us, ‘Do not touch the metal card proposition.’ Metal is now a brand association for us across the entire segment.”

The Warship Card

Along with the payments experience, many metal card users increasingly look for purpose and sustainability in these products.

“What is the story behind it?” Hathi said. “There was a motorbike and cycle manufacturer, and there was a very prominent and large warship which was being retired after its time was done in the navy. What they did is they took the metal out of that ship, and they created their bike using that metal, and that became a collectible. What is the story behind my metal card versus your metal card?”

In addition to a card’s backstory, the type of metal can also entice some consumers. For example, Robinhood recently released metal cards made from 10-karat gold as an exclusive for certain members.

Alternatively, many consumers seek cards that are linked to charitable causes or sustainability initiatives, or that are created from recycled materials.

“It plays to a card that we made for American Express with Delta, where we made a card out of a retired 747,” Gourbault said. “In terms of recycling, we stripped off the fuselage and made it into something that we could create into a collectible.”

A Material That Resonates

Whatever its origins, metal has long resonated with consumers. For centuries, it has been used to forge tools, craft works of art, and both adorn and protect the human body.

Beyond its practical and aesthetic uses, metals have also served as one of the most widely recognized forms of currency across cultures worldwide. For these reasons, metal cards naturally convey value and prestige to consumers—making them a compelling differentiator for card issuers.

“It’s very important in conveying the brand and I’m sure it produces brand loyalty, but it’s not just about the perks, it’s about how the card makes you feel,” Gourbault said. “The experience of these customers where they’re unboxing and they’re cutting their birthday cake, it’s all about how you make them feel. When you do that well, it produces a great return on investment.”

The post Metal Card Magnitude: How a Premium Touch Can Enthrall High-Value Customers appeared first on PaymentsJournal.

Balance transfers can be a powerful tool for consumers who are struggling with mounting credit card debt, but such offers come with their fair share of risks. For consumers, there is the risk that rolled-over debt can avalanche if unforeseen circumstances arise and they can’t to pay off their obligations in time.

Because roughly half of consumers do not pay off balance transfers in the allotted period, issuers face the risk of default. However, as Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, detailed in the report Credit Card Balance Transfers: A Consumer’s Opportunity and an Issuer’s Bet, significant opportunities remain for those small- to mid-market issuers considering credit card balance transfer products.

Paying the Piper

Even if there are risks for consumers, the benefits of a balance transfer, when leveraged properly, are substantial. The main benefit is it allows consumers to get off the revolving debt wheel and secure a minimal or zero interest rate loan for a fixed time period. Although customers pay a fee for this right, the long-term savings often far outweigh the costs.

For issuers, one of the main advantages to offering credit card balance transfers is they realize this fee immediately, which often ranges from 3% to 5% of the balance.

Additionally, balance transfers are a straightforward way to bulk up an issuer’s portfolio because the borrowers have been pre-screened and carrying over a balance is often a lighter lift. In turn, many crucial portfolio metrics get a boost, which is typically how financial institutions gauge their performance.

Although the consumers who leverage balance transfers are often revolvers of debt, it can be beneficial for banks to have this knowledge up front. Unlike some consumer groups for which delinquencies can be unforeseen, issuers are aware that they must watch credit card balance transfer customers more diligently because of their penchant for revolving debt.

Financial institutions will have to proceed with care with these products, especially as consumers continue to battle high inflation and interest rates. If the consumer doesn’t pay off their balance within the prescribed timeframe, usually 12 to 20 months, they will be forced to pay off the remainder of the balance at the prevailing interest rate.

“Sooner or later, they’re going to hit a bump in the road, whether it be a loss of a job or some other piece,” Riley said. “That can kick off lots of interest income, but there’s a piper to be paid. Consumers can also misuse these without a doubt, where you take it out under the pretense of doing a balance transfer, transferring a 22% rate over, and then sometimes they get misdirected.

“The consumer might not be living up to that promise, and they start stacking up more debt and that can create an issue that takes years to resolve. Interest revenue is important in cards, but it also indicates the cardholder cannot extinguish their balance, so issuers must remain cautious.”

Timing and Selection

Although the nature of credit card balance transfers bring additional considerations, these are not novel products. Banks have been conducting balance transfers for years, and major banks like Citi and Chase have their own balance transfer infrastructure. However, these tools are now available to issuers of all sizes.

“Banks that use Fiserv and FIS have these tools available, but sometimes they don’t like the risk tolerance,” Riley said. “Sometimes they’re concerned about doing it, but when you look at how you’re going to compete against the top issuers, you have to have similar tools—and they’re available and they should be used.”

To mitigate the risks, these tools help issuers implement controls to keep customers current and ensure institutions are aware of any line increases. It is critical for issuers to know if customers are veering toward default so they can take steps to ensure the institution doesn’t bear the brunt of the risk.

This risk means issuers must also be judicious in how they offer credit card balance transfers. These tools shouldn’t be offered to every customer; institutions should identify demographics where there are balances within accounts that are at other institutions and start there.

Additionally, issuers should be cognizant of seasonal concerns. For example, September may not be the best time to offer a balance transfer because summer is over, many borrowers or their families are returning to school, and there are often too many financial balls in the air.. The beginning of summer or the winter holidays are two better opportunities to send balance transfer offers.

These two aspects—selecting the right customers and choosing the right time—are critical to the success of credit card balance transfers. When offered properly, balance transfers can be a powerful tool for customer retention.

“Credit card issuers have an issue on the number of people that have tried either voluntarily or involuntarily over the year and they have to make that gap up when the next year rolls around  if they want to grow,” Riley said. “It would be covering attrition rates that could be 7% to 10% and the next year’s bogey, so being able to hold these in place is important.

“This is a good retention tool because it does keep the customer engaged. It’s giving them something of value in a controlled situation, and you’re not lending the money forever. It’s on a specific term.”

The Retention Potential

Some banks have been aggressive with the terms they offer for credit card balance transfers, but the risks involved mean a more measured approach may be prudent.

“I saw one recent offer on a zero balance transfer that puts you out to 2027 already,” Riley said. “That’s about the limit that you want to do. It’s maybe 16 months. But being able to integrate that in the strategy for retention is important.”

This retention potential, coupled with immediate fee realization and portfolio enhancement, means that properly managed credit card balance transfers offer a significant opportunity for financial institutions.

The post Navigating the Risks and Rewards of Credit Card Balance Transfers appeared first on PaymentsJournal.

After decades of contention, Visa and Mastercard are reportedly ironing out another settlement with merchants over interchange fees.

According to the Wall Street Journal, the two companies may agree to incrementally lower credit card interchange fees merchants pay—from current rates of roughly 2% to 2.5% to about 0.1% over several years.

While that reduction would be significant, another aspect of the proposed settlement could have even greater implications: it would allow merchants to decline certain credit cards—namely high-fee rewards cards—at the point of sale, when they were previously required to honor all cards.

“The core value proposition of the Visa and Mastercard brands is the ability to unite many issuers and merchants under a common brand,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The brand mark tells consumers that you can use your card here, you don’t have to worry if the merchant accepts only Chase or Citibank cards.”

“Splitting the Visa and Mastercard brands into rewards and non-rewards will create confusion among cardholders about which type of cards that a merchant accepts—the exact issue the brands were created to avoid,” he said. “Will merchants need new signage that says which kinds of cards they accept?”

The Price of Milk

This uncertainty could rapidly become disruptive because rewards cards have shifted from being the outlier to becoming the norm. Visa and Mastercard initially introduced rewards cards to compete with American Express for high-income customers.

Because Amex charged merchants more to fund its rewards program—roughly 3.5%—Visa and Mastercard issuers followed suit, introducing their own rewards cards with higher interchange fees. At first, the limited number of rewards programs meant the share of transactions subject to higher fees was small, so the impact on merchants was nominal.

“What nobody saw coming was a war among issuers racing to get in on the action, building up to where 90% of cards now are rewards cards,” Apgar said. “Even though the interchange rates haven’t gone up per se, the effective cost to the merchant has increased steadily as more of the cards they accept qualify for the higher rewards interchange.”

However, the higher transaction fees are also one of the reasons American Express has not been as widely accepted as Visa and Mastercard. Now, those same companies are facing similar pushback from merchants.

“Nobody expected the rewards market to get so big, but how do you get the toothpaste back in the tube?” Apgar said. “I think Visa and Mastercard are betting that merchants won’t opt out of rewards card acceptance, and they’ll get merchants to accept a compromise they can’t use. That’s a risky strategy in my opinion, as there are merchants ready to do that. Costco has one foot in that direction—where they accept Visa, but the only Mastercard they accept is the Costco Mastercard.”

“I go back to Econ 101: the price of milk must be low enough so that consumers will buy it, yet high enough that farmers will produce it,” he said. “That’s when the market is in equilibrium. The interchange seesaw has tipped too far, and merchants generally agree that the cost of card acceptance is too high. Farmers aren’t selling milk—they are turning it into cheese.”

A Shift of Control

The question for Visa and Mastercard and their issuers is how to restore equilibrium—where merchants view interchange fees as fair and consumers can still enjoy the rewards they value.  

While there may not be an immediate answer, any settlement between the credit card companies and merchants would still require court approval—a stage where previous proposals have stalled. Still, credit card issuers should prepare for a sea change.

“In the new world, consumers will need to know if a merchant will accept their specific card,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “The situation can get very complicated if the card is an enhanced product such as Mastercard World Elite or Visa Infinite. There is a shift of control at the acceptance point, from the card issuer to the merchant.”

“The big deal to watch is whether cardholders will lose confidence in their card,” he said. “Consumers may need to have multiple cards in their wallets or purses to ensure the merchant will accept the product. For some large issuers that have strong merchant relationships, this might be a positive. But expect chaos for small issuers who might just issue one type of a credit card.”

The post Visa and Mastercard’s Merchant Settlement Could Imperil Rewards Cards appeared first on PaymentsJournal.

There are now more super prime and subprime borrowers, leaving fewer consumers in the middle of the credit market.

According to TransUnion, the share of super prime borrowers—low-risk consumers with exceptional credit scores—increased from 37.1% in Q3 2019 to 40.9% in Q3 2025, representing roughly 16 million additional customers.

At the other end, the subprime segment also saw an uptick after contracting during the pandemic, when many consumers paid down debt. Together, the super prime and subprime groups drove higher origination volumes and overall growth in the credit card market.

“TransUnion always has great card-level data based on information furnished by lenders,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “Here we see consumer polarization between good scores and weak scores, and everything in between. Super prime cards are booming, and you can expect to see more with Amex, Chase, and Citi’s amped up offers.”

An Avalanche of Offerings

The premium card market has heated up as economic conditions continue to batter the average consumer. To reach more affluent—and potentially more stable—customers, American Express and Chase have both recently enhanced their premium card benefits and raised annual fees.

Citi followed suit with the launch of its premium-tier Strata Elite card, and an avalanche of offerings aimed at the super prime market has followed. Even Klarna launched subscription tiers for its debit/BNPL card, designed to offer luxury perks without the debt associated with traditional credit cards.

More Stress Is Ahead

Meanwhile, the spiraling credit card balances have pushed many consumers, especially in the subprime segment, toward BNPL cards. However, the TransUnion report found that despite the significant amount of existing debt and credit growth in the subprime segment, delinquencies have continued to decline.

This may reflect improving consumer credit health, but issuers have also played a role, most notably by tightening credit lines. The average new account credit limit has dropped, and TransUnion found that subprime credit limits were down 5% year-over-year. Still, even with the drop in delinquencies, credit card issuers aren’t out of the woods yet.

“With the government shutdown and SNAP, expect to see more activity in line utilization,” Riley said. “Delinquency is rising slightly, but not alarmingly. Watch out for some younger segments that are under stress, particularly if they are subprime.”

“Credit card managers should be using bureau analytics to keep their eyes on two specific data points outside of plastics as inflation persists,” he said. “The increasing number of unsecured personal loans is up from 25.4 million in 2022 to 31.8 million—which is a stress indicator for the household budget—and auto loans are increasing to a point that they can have a real household impact. With tariffs in flux, more stress is ahead. But do not forget middle America—the points between superprime and subprime—as that is where the volume is. Keep a cautious eye on increases in revolving debt.”

The post More Consumers Shift to the Extremes of the Credit Risk Spectrum appeared first on PaymentsJournal.

As more credit card companies compete for affluent customers, American Express is updating the benefits lineup on its premier card and raising the annual fee to $895.

The new fee represents a substantial jump from the previous $695 mark, but Amex maintains that the hike is justified by the expanded perks and partnerships it has cultivated.

These enhancements now include credits at Uber, Lululemon, Oura, and Resy, in addition to the travel and dining rewards Amex is known for. Streaming benefits have also been added to the mix.

“The $895 annual fee is shocking, however Amex counters with an earning potential of $3,500,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “Amex is sticking to its strategy of offering statement credits with brands like Uber and premium retailer Lululemon.”

“The problem is that if these credits are with brands that don’t resonate with consumers, then the card begins to lose value quickly,” he said. “General offerings like travel credits may have a wider appeal than brand specific credits. However, Amex has done its research, knows its audience, and is targeting them with these brand credits.”

Competing for Customers

This Platinum card update was unveiled several months ago, around the same time that JPMorgan Chase announced changes to its Chase Sapphire Reserve card, though full details weren’t released.

Shortly after, Citi announced the launch of its Strata Elite card, positioned to compete in the luxury space. Strata Elite carries an annual fee of $595, compared to Sapphire Reserve’s $795 fee.

One reason companies have raised fees and tightened lending standards is to better target affluent customers. This group is seen as more reliable and tends to spend more—one of the factors behind Amex’s dramatic increase in worldwide merchant acceptance over the years.

A Premium on Stability

This focus on affluent customers has also been driven by macroeconomic uncertainty. As inflation and higher interest rates have fueled mounting consumer credit card debt in recent years, stability has become increasingly valuable.

Another factor pushing issuers to strengthen their customer base is the recent merger of Capital One and Discover, which created the largest lender in the U.S. This competitive pressure, combined with the absence of imminent regulation on credit card fees, suggests that more luxury credit card offerings are likely ahead.

The post Amex Refreshes Platinum Card Perks and Lifts Annual Fee appeared first on PaymentsJournal.

The average yearly spending on American Express cards is significantly higher than that of competing credit cards, which helps explain its thriving network of merchants.

The lender’s cards are now accepted at roughly 160 million merchants worldwide, representing a five-fold increase over the past eight years.

One of the main reasons for this growth is Amex’s international expansion. The average annual spend on Amex cards issued outside of the U.S. is approximately four times higher than competing cards, compared to nearly three times higher for cards issued within the U.S.

“Amex has had the pedal to the metal on card acceptance outside of the U.S. and has made significant progress in connecting with payment facilitators, digital wallets, marketplaces, and aggregators in large markets like China,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.

“Amex has always delivered a higher level of spending and average purchase sizes for merchants, but the higher cost of acceptance for merchants has historically been a barrier to expanding acceptance,” he said. “While specifics aren’t disclosed, I’m sure Amex has brought some innovative pricing solutions to the table that help to reinforce their value proposition for merchants.”

A Strong Strategy

Amex has long targeted an affluent customer base by requiring higher credit scores and charging annual fees for its products. For example, its premium-tier Platinum Card recently saw its annual fee raised to $695.

This focus on affluent cardholders has paid off: American Express has been able to build and maintain a strong lending portfolio at a time when many consumers are under immense pressure from inflation and rising interest rates.

The strength of this portfolio was underscored by the recent DFAST tests, a set of government-mandated assessments designed to simulate a severe economic downturn. In these tests, both American Express and its main rival in the premium credit card space, Chase, ranked among the top performners—thanks largely to the stability and reliability of their customer bases.

Leaving Home with It

To reward these customers, both Amex and Chase have built a substantial array of travel, dining, and entertainment perks. American Express, in particular, highlighted how travel has also contributed to the expansion of its international merchant network, especially in Japan, the UK, and the Caribbean.

This marks a significant shift for a company that had previously focused primarily on its stateside operations.

“The Amex card has always been strong for travel purchases, but at the same had gaps in utility when travelers reached their destination,” Apgar said. “This push toward expanding merchant acceptance is long overdue and creates significant utility for cardholders, who may no longer be concerned about leaving home without a secondary card brand in case Amex isn’t accepted.”

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Credit card companies often promote introductory offers to attract new customers—but who finds these deals most appealing? By looking at consumer interest across different income ranges, we can start to see patterns in how people respond to these promotions.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Acquisitions: An Intro to Introductory Offers

Interest in Credit Card Intro Offers Across Income Groups

• 52% of consumers making less than $50,000 desire intro offers.
• 58% of consumers making $50,000-$74,999 desire intro offers.
• 58% of consumers making $75,000-$99,999 desire intro offers.
• 57% of consumers making $100,000-$149,999 desire intro offers.
• 60% of consumers making more than $150,000 desire intro offers.

Source: Javelin North American PaymentsInsights, 2025

About Report

Between 2016 and 2025, the number of U.S. adults rose by just 10%—but credit card openings surged nearly five times faster. During that same window, consumers racked up over $360 billion in revolving credit card debt. Despite economic uncertainty, issuers continue to aggressively pursue growth, often sweetening the deal for new customers with limited-time offers. These upfront incentives—like welcome bonuses and temporary 0% APR—can jumpstart spending and boost account engagement.

While effective, these perks come at a cost, especially for premium and rewards-based cards. To manage the financial hit, issuers rely on specific accounting practices that allow them to spread out the expense of these offers across the expected lifespan of the account. This strategic approach contrasts with the immediate outlay required for traditional marketing spend. In this Javelin report, we explore the role of credit card accounting standards in enabling introductory promotions and how they support long-term acquisition strategies.

The post Is Desire for Credit Card Offers Driven by Income? appeared first on PaymentsJournal.

Since the 2007-08 financial crisis, all U.S. banks that have been categorized as systemically important have been required to undergo annual stress tests. These tests were detailed under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed after the recession, and have become colloquially known as the DFAST tests.

This objective of the DFAST assessments is to identify significant vulnerabilities in the U.S. financial system before they occur. As Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, detailed in the report DFAST: Tight Credit Card Risk Controls Ensure Bank Liquidity, top banks may not be in any imminent danger, but credit issuers must consider many factors as they forge ahead into next year.

A Catastrophic Cocktail

The DFAST tests measure how each financial institution would respond to a hypothetical economic downturn. In this worst-case scenario, unemployment rises to 10%—as it did during the COVID-19 pandemic—and housing prices fall by roughly a third. Taken with other factors like plummeting equity and real estate values, the DFAST tests create a catastrophic cocktail for financial institutions.

This year’s tests found that these factors would cause more than $500 billion in total credit losses for the top financial institutions. As with last year, consumer credit card losses would be the most impactful among all lending segments, totaling $157 billion. Excluding trading losses, credit cards would account for roughly a third of all projected losses for financial institutions.

Although these numbers were significant, the projected total losses and credit card losses were down from the year before. However, banks aren’t completely out of the woods.

“I think it showed how resilient banks are right now, which is good,” Riley said. “There are a lot of operational improvements, and the charge-offs have been under control, and that’s a good thing.

“The economy is always the risk. Right now, the trend is that it’s going to be better because some of the charge-offs are down, some of the delinquencies are down, but you still have consumer credit at an all-time high—it’s like $1.3 trillion. In the last 10 years, it’s gone up by over $300 billion, so that’s a lot of bananas. You have to be worried about where this is going to level off.”

A Proof Point

This substantial stress on consumers had direct effects on this year’s DFAST tests. Most notably, Ally Financial is no longer included in the index because the company sold its credit card portfolio last year. Ally Financial’s credit risk simulation was the weakest among all credit card issuers, running at a projected 40% loss rate. 

Ally built a loan portfolio that catered to borrowers with lower-range credit scores. As a result, Ally was at high risk of default and delinquencies as economic factors pressured consumers in these income brackets.

This was evidenced by last year’s DFAST tests, in which Ally Financial was the poorest performer. The assessment found that Ally would face severe losses under the stressed conditions of DFAST, far more than the 16% to 20% range other lenders experienced.

On the other end of the spectrum, American Express and Chase performed the best in last year’s DFAST tests, and they achieved similar success this year. This is largely because they have cultivated a different customer base from Ally’s.

“The big deal is that American Express and Chase, the two top leaders, are still at the best performance level,” Riley said. “It’s an example showing how American Express uses a lot of discretion when they underwrite. It’s typically FICO scores above 720, and that’s a proof point. Chase is diversified in a lot of ways—they were anchored to the consumer households, and they take advantage of that in their marketing. Those are two good signs of what’s going on.”

Balancing Credit Investments

According to Riley, financial institutions should take a page out of the top lenders’ playbooks and prioritize quality over quantity. One aspect of this model is tightening lending criteria to match borrowers’ FICO scores, but attracting and maintaining a quality customer base is more complex.

Financial institutions should also entice potential cardholders with attractive offers and work to build strong relationships with their customers. Banks also must scrutinize all new accounts and take a closer look at their underwriting processes. Another consideration for lenders is keeping their portfolios balanced to ensure they aren’t over-exposed to one client segment in the event of a downturn.

One of the most important lessons from the DFAST tests is that credit cards play a significant role in the operations of financial institutions and consumer households. Although all of the top-tier institutions passed this year’s assessments, significant risks are in play for smaller issuers.

Credit cards offer high returns for issuers, but they can quickly become a high risk if there is an economic mishap. This means that smaller issuers shouldn’t become overly dependent on their credit card portfolio.

The Party Isn’t Over

Concerns remain about the state of the economy, as inflation and interest rates are still high, and the impacts of tariffs loom. However, if this year’s DFAST tests are any indication, most financial institutions are prepared to weather the storm.

“I think we have to thank our lucky stars that many of the metrics did not deteriorate—that’s important,” Riley said. “There are mixed feelings on why it hasn’t. There’s a lot of talk on interest rates going down right now; they’re relatively high. In Canada, they’re significantly lower. Which one’s better? A lot of it depends on who you ask.

“The takeaway is that things are better, but everybody is walking on eggshells because debt is higher and prices are higher. Even though there are mixed levels of optimism, things do look better in a lot of ways. I wouldn’t say the party’s over because you have indicators like the rising amount of debt.”

The post DFAST Tests Indicate U.S. Financial Institutions Are Braced for an Economic Downturn appeared first on PaymentsJournal.

Attracting affluent customers has become a top priority for credit card issuers. To capture this segment, Alaska Airlines is launching a luxury credit card and ramping up its loyalty program.

The airline’s Atmos Rewards Summit Visa Infinite card, a co-branded effort with Bank of America, carries a $395 annual fee and offers benefits like discounted fares, $50 travel delay vouchers, and access to airport lounges.

Alaska Airlines is also expanding its frequent flyer program, Atmos Rewards, to include the newly acquired Hawaiian Airlines. The program will allow travelers to choose how they earn points—based on miles flown, price paid, or the number of flights taken.

“2025 is the year for premium cards,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “We’ve seen major launches from American Express, Chase, Citi, Barclays (with JetBlue Airways), and now a premium co-brand from Alaska Airlines issued by Bank of America. The quest is to attract low-credit-risk, high-spend customers—a good demographic to have in the case of an economic downturn.”

Sparking a Surge

Chase and American Express have long been major players in the premium card market, but recent revamps of their products have sparked a surge in luxury card launches. Chase’s Sapphire Reserve and Amex’s Platinum card now offer an extensive range of benefits, including travel and dining perks. Not long after, Citi entered the market with the launch of its Strata Elite card.

With these new offerings, annual fees have climbed sharply. Sapphire Reserve carries a $795 fee, the Premium card cost $695 per year, and Strata Elite comes in at $595 annually. Still, each issuer insist that the value of their benefits far outweighs the price.

Following the lead of the industry’s top players, JetBlue launched a premium credit card with Barclays earlier this year, which comes with an annual fee of $499.

High Scores, High Stakes

All of these premium card launches target savvy, disciplined consumers—most of whom have credit scores over 720. In today’s environment of rising inflation and mounting credit card debt, these financially stable customers have become especially valuable.

While this is the customer base Alaska Airlines hopes to capture, the premium card market is rapidly becoming crowded.

“Economics aside, these kinds of cards transform the brand image into a more premium feel with exclusive offers, lounge access, and perks,” Danner said. “The Alaska Airlines plan expectedly follows the same recipe for success by using a loyalty tier program and points-based reward plan. The $395 annual fee will compete directly with co-brands like the Delta SkyMiles Platinum ($350) and United Quest Card ($350).”

The post Alaska Airlines Joins the Premium Credit Card Movement appeared first on PaymentsJournal.

One of the most important resources for any card portfolio manager is understanding cardholders’ spending patterns. This requires not just full access to data, but also the ability to interpret what the data reveals.

Growing business intelligence tools like Card Expert^SM from Fiserv are helping issuers gain deeper insight into their customer base, allowing them to serve cardholders more effectively.

In a PaymentsJournal Podcast, Janine Wilson, Director of Data Solutions at Fiserv, discussed innovative ways financial institutions are now leveraging cardholder data. She was joined by Deana Bartel, Vice President of Payment Services at Randolph-Brooks Federal Credit Union, and Derek Hayes, Senior Products Manager of Cards and Payments at 1st Source Bank—both of whom are using Card Expert to inform strategy and deliver stronger results.

Decisions Driven by Data

At the strategic level, cardholder data is essential for understanding not just where clients are transacting, but how they’re transacting—whether through digital wallets, e-commerce, or traditional card-present channels. Insights into spending behaviors and peer benchmarking are critical for assessing issuer performance, Hayes noted.

“At a more granular level, the data allows issuers to build detailed client personas by analyzing variables such as age, available balance, transaction frequency, and preferred shopping channels,” Hayes said. “Questions like whether a client uses a digital wallet or shops online are easily answered.”

“It’s absolutely critical that our clients have access to data and use data to drive their decision making,” said Wilson. “We created Card Expert a number of years ago to address this challenge. This tool takes the mountain of transaction and card usage details that exists and distills it into actionable insights. It’s a single platform containing lots of data around card portfolio performance for our clients, as well as showcasing how their customers interact with and utilize the various card surrounds that support their portfolio.“

Card Expert highlights where banks and credit unions are performing well—and where they have opportunities to improve. This might include reducing time and expenses related to reporting tasks, identifying areas of decline within their portfolios, and engaging specific groups of cardholders to drive actions like activation and usage. Without clear insights into portfolio performance, it’s impossible to make informed decisions or target the right customers with the right offers.

“Card Expert has been an easy and effective way for my team to access that data,” said Bartel. “We’re using that data to improve things like the rate of cardholder declines, driving digital wallet engagement and taking a more proactive approach to personalization versus segmentation when engaging with our cardholders.”

The solution provides an executive-level overview of an issuer’s portfolio while making it easy to drill down into the data. RBFCU uses Card Expert to review declines and identify ways to improve the member experience. It plans to use these insights to send near real-time notifications, allowing members to self-correct without needing to call or switch to another card.

Increasing Card Usage

1st Source Bank used Card Expert segmentation tools to analyze clients at different levels, pinpointing those with no or minimal card activity. The data allowed them to design campaigns encouraging these customers to use their card for the first time or increase their usage.

Another campaign focused on expanding digital wallet usage. Card Expert provides visibility into which clients were actively using digital wallets, in turn allowing 1st Source Bank to design campaigns that encouraged clients either to add their card to digital wallets or to increase their usage, ultimately driving both engagement and transaction volume.

“We want to make sure we’re making data-driven decisions,” said Hayes. “We’ve added data from Card Expert’s benchmarking capabilities into data from our core systems and from Mastercard to ensure they get a holistic picture of the customer. The multi-source approach allows us to develop a more comprehensive and targeted strategy.”

Bartel added: “Before moving to Fiserv for our card portfolios and leveraging Card Expert, we rarely used our data in a proactive way because we didn’t have easy access to it. With those limitations, we took a very generic approach to optimizing the portfolio, with lots of generalized campaigns and marketing going out to our cardholders. But we’ve been able to see a shift in how we communicate with our cardholders by leveraging Card Expert, because the data is truly at your fingertips. And one of the things that I love is that it’s continually getting enhancements to make it even more beneficial to my financial institution.”

Keeping the Conversation Going

Fiserv holds monthly sessions to keep its client banks and credit unions connected to ongoing product enhancements. The company answers user-submitted questions live and demonstrates best practices, highlighting tips and tricks for getting the most out of this content. Participants can discuss strategy, how best to use the data, ways to engage members and cardholders, analyze portfolio trends, and benchmark against peers.

“RBFCU is still navigating our data journey, but Card Expert makes it feel like it’s not as daunting of a task for us,” said Bartel. “One key is to define and prioritize your data use cases. Creating those use cases will help you focus on what’s most important to you, and the organizational goals.”

On the horizon for Card Expert is enhanced interchange trends and continued innovation to expand benchmarking beyond today’s debit and credit portfolio metrics. This data will help banks and credit unions see how they stack up against various peer groups, and where they can focus their efforts for growth and improvement.

“We continue to engage with our clients to understand their requirements for expanded capabilities like data sharing or data as a service,” said Wilson, “To ensure that we deliver on the goal of being a partner in data.”

The post Unlocking Profit: How Data Mining Transforms Card Portfolio Strategies appeared first on PaymentsJournal.

After exiting the market several years ago, Citi is reentering with a premium credit card designed to take on Chase and American Express.

Like its rivals’ top-tier offerings, Citi’s Strata Elite card boasts an array of perks. For weekend diners, it offers 6x points on restaurant purchases made on Friday and Saturday. Shoppers also receive a $200 annual splurge credit usable at select brands including American Airlines, Best Buy, and Live Nation.

Travel rewards are also in the mix, such as a $300 annual hotel credit that can be applied to a two-night stay. However, there is a caveat—most travel perks are only available when bookings are made through Citi’s travel portal. While that may not be a dealbreaker for everyone, it exemplifies the importance of reading the fine print when it comes to premium cards.

“These luxury cards are great, but before investing, you will need to think through what you want from your latest favorite credit card,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “I have an Amex Platinum, a downgraded version of Citi Strata, and I closed my Chase Sapphire after two years. After reviewing the terms and conditions of all three, you know that the cards can more than pay for themselves—but you must also learn how to use them effectively to achieve a return on your investment.”

A Timeless Cache

According to Citi, Strata Elite can return roughly $1,500 per year to its cardholders. However, like other luxury card products, the card comes with an annual fee. Still, Strata Elite’s $595 per year price tag clocks in lower than both Chase’s Sapphire Reserve and Amex’s Platinum card, which have fees of $795 and $695, respectively.

“If you want all three, it will cost you a combined $2,000 a year, so this is not for the weak of heart,” Riley said. “I like the Amex Platinum because the card has timeless cache, it was cool before all others. However, to maximize my return, I need to do a little work, ensuring that I use my Uber credit monthly and transfer my personal New York Times subscription to my American Express card.”

“Similarly, with Sapphire Reserve, there is an excellent credit for Apple Music and Apple TV+,” he said. “However, if you use Amazon Music and YouTube, you will need to make adjustments. Nevertheless, you can still be a winner with Chase Travel. Similarly, Citi’s Strata Elite is terrific if you like Citi Travel, and who wouldn’t want the nice $200 splurge credit?”

Keep Your Eyes on the Ball

Citi’s reentry into the premium card market is part of a larger trend in which financial institutions are increasingly focusing on the affluent customer base. As economic pressures have battered the everyday consumer, individuals with high credit scores have become a sought-after commodity.

However, it remains to be seen if the market has room for another premium credit card.

“Keep your eyes on the ball—these cards are great if you maximize your options, but what is going on behind the scenes is the real issue,” Riley said. “Notice the importance of merchant-funded rewards in bulking up the value proposition. Keep your eyes on the second-year benefits because that might change your position in 2026. We wrap up some subtle and not-so-subtle industry shifts in rewards here.”

The post Citi Launches Premium Credit Card to Rival Amex and Chase appeared first on PaymentsJournal.

Artificial intelligence has been a part of the credit landscape for a while now, but generative AI promises to fully change the game. From the ubiquitous chatbots to enhanced credit scoring to personalized loyalty programs, AI is trained on every aspect of the credit industry.

In From Hype to Impact: How AI Is Transforming Credit, a new report from Javelin Strategy & Research, Ben Danner, Senior Analyst, Credit and Commercial, looks at what changes lie in store for card issuers. “Generative AI is changing the way financial institutions analyze data and is streamlining customer service operations,” Danner said. “But it also comes with considerable risks.”

The Existing Use Cases

The most visible example of AI now is the chatbot, which we can expect to get more intelligent as AI capabilities expand. Instead of a basic chatbot that sends you through a link list or a hierarchical checkbox list, the improved bots will use natural language processing to have more intelligent and human-like responses. The enhanced intelligence comes with some challenges, presenting the prospect of an untamed chatbot going off the guardrails and saying all sorts of strange things to customers.

In the credit scoring and decisioning spaces, AI has been used for a while to work through unstructured data. Generative AI can output new modes of information based on what it’s been learning. But there are potential regulatory hurdles limiting how that data can be used for scoring and decisioning. Credit scoring is tightly regulated, with a variety of laws that have been on the books for years and haven’t caught up with some of the advances in AI tech.

Companies like FICO say they’re not using AI at all right now in their credit scoring. But other companies that provide data to FICO are leveraging AI technology. They are using it to analyze unstructured data, like social media, email, and even tax returns and rental agreements.

“A rental agreement or an invoice might come to you in a PDF, for example,” Danner said. “But if you need to provide that to your credit agency, a human would have to sit there and look through that document, find what you owed and if you paid it on time, and all that. AI can look at those unstructured invoices, aggregate all the data together, and build that profile for you.”

Unstructured data has a lot of promising uses for evaluating creditworthiness. But regulatory concerns have limited its use when it comes to actually constructing a credit score.

Problems to Be Solved

As a rising and rapidly changing technology, AI still has several kinks to be worked out. By now, everyone has become familiar with AI’s problems with hallucinations.

“I used ChatGPT this morning when I was trying to analyze a certain graph,” Danner said. “I asked it to spit me back three sentences on what it thought this graph was about, and it sent me back numbers that were incorrect. I think it interpreted an 8 for a 6 on one of the charts and sent back data that was completely wrong, but it defended it like it was correct. That’s been one problem that’s plaguing data.”

Another concern is the transparency of the model. AI tends to be a black box, which makes explaining how some of the algorithms arrived at their choices difficult. A credit regulator needs to know how the model comes up with its decisions.

“If you can’t explain the result to me, then we can’t use that,” Danner said.  “That’s something all the AI companies are trying to figure out. That’s why there’s all this verticalization of AI and using their own data internally, so that they can fully explain their model. They’re not just going out and getting data from all over.”

Finally, there is algorithmic bias. Training an algorithm from data collected by humans will introduce biases, and those biases will be reflected in the outputs from the algorithm. A study from Lehigh University looked at racial disparities in large languages models and found these disparities persisting in mortgage underwriting.

“It’s perpetuating these social inequalities,” Danner said. “The banking industry’s been trying to correct those mistakes, especially in credit. Those are things that need to be solved for with these models before a wider application.”

Personalizing Loyalty and Rewards

Credit card companies have also begun incorporating AI into their rewards programs. Much of the data they’re using is derived from transactions. Every time a shopper swipes a credit card, the issuer is collecting that data, then using it to offer different merchant rewards.

For example, Chase has its Chase Offers platform built into its mobile app. Every swipe builds another piece of a huge transaction history. AI has the ability to take a large data set like that, with thousands and thousands of transactions, and personalize it to just one individual.

“Let’s say I know Ben likes to buy coffee in the mornings at 8 a.m.,” Danner said. “Should we present some type of offer to him at 7:45?  If a human had to do that, you would have to hire a whole team of people to sit there and figure all that out. We can now have AI analyze all that transaction data. That’s an opportunity for card issuers that are historically sitting on millions of data points but don’t have a good way to analyze or leverage that information.”

The Next Steps

The new agentic AI shopping models will make the world even more complicated. We will soon have AI agents making payments on behalf of customers. Consumers will eventually figure out how to use that system to find the best deal for hotels, for example, but issuers will also use it to garner more usage from their cardholders.

“Visa gave us a little bit of a hint into their how their AI analytics is going to work,” Danner said. “They presented a picture of a cellphone with a person requesting a hotel, saying, ‘Could you find me the best hotel in the area?’ And it popped back and said, ‘Sure, would you like to add your card to this?’”

The post Smart Cards: How AI Is Changing the Credit Industry appeared first on PaymentsJournal.

Digital cards saw a significant boost in adoption during the pandemic, initially driven by necessity. However, it quickly became clear that hygiene was just one of many benefits—and not even the most compelling one. Both consumers and retailers have found digital to be faster, more cost-effective, and more efficient than traditional physical options.

In a PaymentsJournal podcast, Fiserv’s Wesley Suter, Senior Director of Product, and Kush Patel, Senior Product Advisor, as well as Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed the advantages digital cards offer over their physical counterparts, and how banks can tap into those strengths.

The Card-Not-Present World

Post-pandemic, the world has shifted from predominantly card-present to card-not-present transactions. Consumers can now order groceries from the comfort of their couch, then drive to the store where someone loads them into the car. There’s also been growth in digital acceptance at the point of sale, as merchants adopt tap-to-pay systems.

“Roughly 30% of in-person transactions are click-to-pay or digital wallet transactions, and that’s going to grow to over 50% in the next couple of years,” said Patel. “Anecdotally speaking, I live in a neighborhood where our restaurant association has gone completely cashless. Tap-to-pay and digital wallet transactions are very important to cardholders, not just at home but when they’re shopping in stores and at restaurants.”

Beyond shopping, businesses are working to make it easier for cardholders to digitally complete tasks that were traditionally done through human interaction. That can include something as simple as activating a card or more complex and curated experiences like disputing a transaction.

Ultimately, it’s not just about making cardholders’ lives easier, but making it easier for them to do business with issuers. Engaging customers to the point where incorporating digital tools becomes a part of their routine sets the stage for stickier relationships, cross-selling opportunities, and deeper engagement.

“When you see the throughput that the integrated experience has with the debit and credit card portfolios, you start to think about the foundational aspects of card management,” said Suter. “How do we get those cards not only in their hands, but active and used. With the integrated model, we have seen digital banking platforms increase 5% to 7% month over month in activation and usage.”

Integrating Debit and Credit

One area in which digital platforms have made a difference is in integrating credit and debit accounts. Issuers used to treat debit card holders differently from credit card holders. They might ask a debit card holder to download an app to manage their card, but if that same user had a credit card from the issuer, they could be directed to a third-party website to make a payment or view statements.

“It’s not the consumer’s problem how the silos might exist in different companies,” said Riley. “To them, it’s a card that they want to use to conduct a transaction. Whether they want the money to come out of a bank account with a debit card or to use a credit line, making that whole process seamless is important.”  

By unifying debit and credit accounts, digital platforms make it easier for cardholders to do business with their issuer. It also better positions the bank to cross-sell between the two accounts.

Creating More Engaged Customers

Another advantage for issuers is that cardholders who can quickly access their funds tend to transact more frequently than those who are less digitally engaged. Credit card transactions were once primarily for big-ticket items, but thanks to digital cards, we’re now seeing an increase in smaller transactions across debit and credit. This results in greater engagement in terms of transaction volume and overall portfolio spend.

They also give cardholders more uninterrupted access to their funds. When a card is lost or stolen and not promptly replaced, 40% of affected cardholders are likely to switch to another issuer or card, leaving the original one behind.

Similar to merchant-specific cards hosted on their own portals, issuers are now beginning to offer digital-only solutions as well, like the Apple Card. Additionally, virtual cards are being rapidly adopted by commercial and small businesses to enable better expense management, faster transaction settlement, and greater control over overall spend.

This trend may also carry into the consumer space as online transactions become more common. Increased online activity exposes cardholders to higher risk and privacy concerns, prompting consumers to adopt virtual cards—whether one-time or merchant-specific—as a way to protect themselves.

Fighting Fraud

Digital transaction also makes it easier to fight fraud. Fiserv’s technology, for instance, can provide contextual evidence around the purchase transaction. Issuers that have adopted this technology at a rate of 75% or higher have seen a reduction in fraud of over 20%. Those with lower levels of engagement are seeing a more modest 5% to 6% reduction in fraud.

“I can tell a layman cardholder right off the street that this is where your transaction was conducted, how much it was for, and where the message came from,” said Suter. “They immediately understand whether it is a legitimate transaction or potentially illegitimate. That deputizes the cardholder, allowing them to understand with pure context whether they performed that transaction or not.”

Behind the scenes, Fiserv leverages neural networks, insights and machine learning not only to fight fraud but also accelerate customization—such as personalized offers based on geolocation. These elements can drive increased spend on those cards.

Steering Them to Digital

We live in a digital-first ecosystem. We can manage our thermostats, do our grocery shopping, and call a rideshare—all from our phones. Our digital banking and finance experiences are a natural extension of that. It’s important to have digitally integrated engagements that accommodate the shift in how consumers interact with their financial institutions.

“Over half of consumers would like to engage with their banking institutions via digital channels rather than going into a branch,” said Patel. “Younger generations expect this at a much higher rate, but more than half of baby boomers and Gen Xers also expect to engage via their mobile channels.”

Every consumer is at a different stage in their lifecycle. Fiserv continues to iterate on its platform to help guide both consumers and businesses in tokenizing their cards into digital wallets.

“Anything that I can do on the phone or in branch now needs to be steered towards that digital component, from disputing a transaction to more engaged relationships around rewards and fulfillment,” said Suter. “At some point the card has to be reissued or replaced. True digital card management is the ability to manage the entire lifecycle relationship of that card and that consumer.”

The post Beyond Plastic: Why Digital Cards Are the Future appeared first on PaymentsJournal.

When Chase and American Express unveiled plans to enhance rewards for their luxury credit cards—and raise their fees—it seemed that these lenders were focusing on the most rock-solid customer base amid economic upheaval.

Though macroeconomic factors have played a part in the renewed focus on affluent customers, these moves involve much more than is apparent at first glance.

As Brian Riley, Director of Credit Payments at Javelin Strategy & Research, detailed in the report Amex and Chase Face Off on Credit Cards, but the Backstory Is More Interesting, smaller credit card issuers can take critical cues from the top issuers’ strategies.

The Timing Is Perfect

In addition to the economic backdrop, the credit card industry is approaching one of the most important shifts in dynamics in decades.

“You have the biggest merger in the history of credit cards going on right now with Capital One and Discover,” Riley said. “The timing of doing this is good because they’ve got to integrate this portfolio, and all of a sudden Chase is going to lose its position as top issuer—it’s now going to be the new Capital One. With all the chaos, the timing is right for Chase and Amex to readjust this piece.”

The issuers are recalibrating by addressing the three best segments in the credit card market.

First are the big spenders, who can afford to make the substantial investment in a product that others receive for free. Next are the strategic buyers, who are willing to pay a high fee for the potential to reap high rewards. The final segment is responsible cardholders, those who have FICO credit scores above 720.

Another attractive trait about the premium segment is that Discover doesn’t have an offering in this space. Capital One does—with its Venture X card—but the$395 annual fee card doesn’t deliver the same caliber of rewards as the Chase and Amex products do.

“Capital One and Discover are middle-market players, but they do have some great accounts,” Riley said. “So here the two biggest players on the premium side aim directly at the top-end segment, so that’s a big deal.

“There are subsegments within that, because you also have the smaller banks in the mix. Here, you are taking on little community banks; you’re marching into their area. You’re presumably going to be taking the top of all their customers and leaving the middle-market stuff there, so the portfolios become less sound outside of Chase and Amex.”

Safeguarding the Segments

Smaller banks won’t be the only institutions affected as Amex and Chase duke it out over premium cards. Other top issuers, such as Bank of America, Citi, and Wells Fargo, will have to shift to defend their top customers.

However, the affluent cardholder base isn’t the only segment that these institutions must safeguard.

“Another big thing here is that—for the first time—Chase is adding their small-business card into the mix,” Riley said. “Now, Amex has always done that in the Platinum card, but it shows you how Chase is addressing the market. That is a real big focus, and it’s a great time to be in the market because with small businesses—yes, some will fail—but many will succeed, and it’s a good choice.”

Investing in the small to medium-sized enterprise market is a strong strategy because typical card spending ranges from $20,000 to $50,000 per month. The arrival of Chase means other issuers must reevaluate their offerings to this sought-after segment.

Betting Against Regulation

Additionally, the moves by Chase and Amex are revealing about the regulatory environment. The credit card industry has come under the microscope in the past few years because of the fees charged to merchants and consumers.

While the Dodd-Frank Act reduced interchange fees on debit cards many years ago, it did not affect credit cards, because credit cards are an independent product not governed by the FDIC.

Some regulators have attempted to remedy this with the Credit Card Competition Act (CCCA), which sought to force price controls on credit card interchange.

“The CCCA has been looming out there, but it is far from being the law of the land,” Riley said. “Here, we’ve got the two of the largest credit card organizations who are really mature—Amex and Chase have been strong players in the U.S. credit card market literally from Day 1. Their bet is the CCCA is not going to happen when you see these premium cards enter the market, or else the revenue dynamics could not support the reward offers.”

Because two of the strongest credit card issuers are enhancing their premier reward programs, other issuers should consider following suit. However, this should be done only if the issuer’s business allows for it. Adding 100 basis points to a card might make it more competitive but also makes it less profitable.

Another area where smaller institutions can follow in the footsteps of top issuers is by benchmarking their card data. Companies like Chase and Amex are constantly adjusting their products based on market conditions, as evidenced by data from Javelin’s Card Bench,  a competitive intelligence card acquisitions tool.

“Offers get honed through the year,” Riley said. “We tracked that there were more than 1,200 different offer changes on just the 200 cards provided by the top 10 issuers. It shows you that when Chase does something, Citi reacts.  Or when Amex amps up an offer, Bank of America antes up. You take the United Airlines Card from Chase and they compete against the Delta card from American Express—when one adds 10,000 points, the other adds 12,000 points.”

Protecting Against an Unbalanced Market

In addition to fine-tuning their offerings, issuers should also constantly reevaluate their relationships with their customers, across all segments. Many of the top banks, such as Wells Fargo, have long been focused on cross-selling other financial products to their existing customers.

“You just don’t have one Wells Fargo product, you have a few others,” Riley said. “Chase is very strong with in cross-selling their financial products. They’ll solicit you for a credit card, and once you get in there, they’ll see how you are, and they’ll go for your deposits. That’s a really healthy way to do this.

“There are some banks that do that better than others. Bank of America has a great program for that, and it’s a good time for issuers to be doing that.  So does U.S. Bank. Nobody knows what unemployment is going to be, and new tariffs are still funky. The timing is interesting, but you have to keep in mind the whole risk of credit cards is still unbalanced right now.”

The post What Premium Card Overhauls by Chase and Amex Reveal About the Credit Card Market appeared first on PaymentsJournal.

Small business credit cards aren’t just for covering day-to-day expenses—they’re strategic tools that can streamline operations, improve cash flow, and even build business credit. Whether it’s managing employee spending, earning rewards on regular purchases, or separating business and personal finances, these cards offer real advantages when used wisely.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Riffing on Tariffs: Now is the Time to Build Your Small Business Card Portfolio

Percentages of Where Small Business Cards Get Used

• 52% – Utilities
• 48% – Advertising and marketing
• 45% – Procurement
• 42% – Insurance
• 41% – Online services

Source: Javelin Small Business Payments Insights, Questions 26a and 26a1 (2025)

About Report

Small businesses play a critical role in driving the U.S. economy, yet many continue to grapple with cash flow challenges that threaten their long-term stability. With tariffs adding pressure and supply chains becoming less reliable, operating expenses have become harder to predict. These conditions highlight a growing demand for flexible financial solutions—creating a strategic opportunity for credit card issuers to deliver products that help small business owners manage uncertainty and maintain control.

The post Top 5 Use Cases for Small Business Credit Cards appeared first on PaymentsJournal.

After lawsuits by hundreds of merchants, London’s Competition Appeal Tribunal unanimously ruled that the interchange fees charged by Visa and Mastercard are a violation of Europe’s competition law.

According to Reuters, the legal team representing the merchants called the ruling a major victory for businesses that have long been burdened by what they argue are unfairly high interchange fees imposed by Visa and Mastercard.

However, this is far from the first time interchange fees have been challenged, both in the UK and abroad, and there has yet to be a significant shift in these fees. For their part, both Mastercard and Visa voiced their opposition to the ruling, and Mastercard said it would seek to appeal the “deeply flawed” decision.

“It’s more of the same warmed over—merchants don’t want to pay fees to accept card payments” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The facts are the same though, if you eliminate interchange fees as a source of income for card issuers, they will be forced to raise prices and/or raise underwriting standards to curtail losses—both of which deflate spending power of consumers.”

A Polarizing Topic

Despite these concerns, interchange fees have become an increasingly polarizing topic in recent years. Just months ago, the UK’s Payment Systems Regulator (PSR) criticized Visa and Mastercard for raising fees and consolidating their dominance in the card payments landscape.

PSR reviewed the market and found that debit and credit card fees on these payment rails add an extra £170 million ($219.7 million) in annual costs for businesses. Additionally, the regulator stated that Visa and Mastercard have increased service fees to acquirers by roughly a quarter over the past eight years, offering little justification for the hikes.

Due to these rising costs, interchange-related legal actions have continued to crop up around the world. For example, a law was recently passed in Illinois that banned credit and debit interchange fees on taxes and tips. However, it has already faced significant pushback from financial institutions.

There was similar contention in the decades-long battle between U.S. merchants and Visa and Mastercard. While a $30 billion settlement was reached last year—declared a win for merchants—a judge ultimately rejected it, stating that it didn’t go far enough to compensate retailers.

Unlocking Payments Opportunities

One reason for the growing pushback against interchange fees is that many merchants are struggling with difficult macroeconomic conditions. This has also led some merchants to begin surcharging their customers—a practice that is often best avoided. Similarly, reducing interchange fees could have significant impacts.

“If you have taken an econ class, think about the definition of a market in equilibrium,” Apgar said. “For example, what’s the right price for a gallon of milk? If milk is too expensive, consumers won’t—or can’t afford to—buy it. However, if milk is too cheap, farmers won’t be incented to produce it, so maybe they make cheese instead.”

“We covered this in our recent research on in-house payment systems, and—while not apples-to-apples with interchange—one of the key findings in our research is that merchants need to focus less on the cost of payments and focus more on leveraging what opportunities payments can unlock for their business,” he said. “Remember it’s card payments that enable buy online and pick up in-store, payment at time of order for restaurant takeout, unattended kiosk payments, etc.”

The post Visa and Mastercard Interchange Fees Face UK Challenge appeared first on PaymentsJournal.

As credit card debt hovers near historic highs, American Express and JPMorgan Chase are preparing to revamp their luxury credit card offerings.

Amex has long catered to a higher-end customer base with its line of cards that offer perks at airlines, hotels, and exclusives, all for an annual fee. At the top of its portfolio is the Platinum card, and American Express recently announced that major changes are on the way for both the consumer and business versions of this card later this year.

The $695 annual fee card is expected to offer more rewards and experiences for its luxury user base. In an interview with CNBC, Howard Grosfield, President of U.S. Consumer Services at Amex, said the benefits of the Platinum card would “far, far, far exceed the annual fee.”

American Express’ announcement follows news that JPMorgan Chase is planning a refresh of its Sapphire Reserve card. Although the travel and dining rewards card has been around for less than a decade, it has quickly emerged as a strong competitor to Amex in the premium space.

The Sapphire Reserve credit card currently carries a $550 fee, but there has been speculation it could rise as high as $795 once new benefits are rolled out. There is also talk that Amex might follow suit with an annual fee increase for its Platinum card.

A Piece of the Pie

These potential fee increases come as more credit card companies bolster their loan loss reserves in anticipation of higher defaults. Inflation has placed considerable weight on consumers, many of whom are struggling with mounting debt and elevated interest rates.

As these challenges persist, credit card issuers are likely to continue their focus on premium products.

“Everyone wants a piece of the pie when it comes to an affluent customer base,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “These are customers that are more resilient to economic downturns and market pressures, and—of course—spend more, which profits the issuers.”

“These are cards that are certainly competing for the same base, especially with the high annual fees which would dissuade most from wanting to have both (who wants to pay over a thousand dollar in annual fees?),” he said.

Changing Perceptions

Despite the fees, customers of all ages have been flocking to premium cards to reap the rewards. However, these perks do more than just attract customers, they also offer credit card issuers an opportunity to build relationships and reshape perceptions.

“I expect Amex to refresh some of its statement credit partnerships–maybe changing out Walmart+ credit?” Danner said. “For Chase, I’d expect some boosted travel perks and maybe a higher annual travel credit and additional rewards point verticals—perhaps to change its image as more than an enhanced travel card.”

The post Chase and American Express Plan Premium Card Revamp appeared first on PaymentsJournal.

Most organizations factor in the cost of doing business when pricing their products or services. However, the costs of credit card acceptance have been a sticking point with many merchants for years, prompting some to tack on a surcharge when their customers use a card.

Although this line of thinking may be understandable, as Craig Lancaster, Payments Analyst at Javelin Strategy & Research, found in Surcharging on Card Transactions: In Search of Balance, substantial risks come into play when a business decides to surcharge, and there are often better ways to pass on costs without alienating customers.

Scaling the Conversation

Most businesses don’t itemize their overhead or supplier costs when presenting the price of their product or service because it immediately invites questions from customers.

“I recently bought a car, and if they had put in front of me that here’s what we’re going to pay the salesperson for having brokered this deal, I would have said, ‘What, you weren’t willing to negotiate with me on price? I see exactly where you could give me a little bit of a break,’” Lancaster said. “Not just in commission, but things like, ‘Do you really need a facility fee?’ or whatever.

“There’s a reason that they don’t line all that stuff out—because they don’t want to put the cost of doing business in the face of the people who come in and buy their products.”

Although it is often not the best practice to single out credit card card acceptance fees as the expense to pass on to customers, there are instances when it is appropriate.

Lancaster examined the case of a small, independent Montana bookstore whose owner took to social media to inform her customers that card acceptance fees were becoming a burden.

The bookstore owner understood that card acceptance was a necessary part of business and did not want to surcharge the full 2.6% interchange fee. Instead, the business owner instituted a 15-cent transaction fee on card payments, a cost imposed by the payment processor. Most of her patrons were sympathetic.

“She said she has seen more cash payments since making the announcement,” Lancaster said. “Cash has its own risks—not the least of which is that it’s sitting there in the till—but a small merchant like that doesn’t have a lot of options. She can accept checks and all that goes with that, and she could guide her customers to cash, and that’s pretty much it.”

Although there are digital options like ACH or even real-time payments, small businesses don’t yet have the tools to implement these payment types for everyday operations.

Additionally, a bookstore owner’s options are limited by the fact that most barcodes on the back of a book are embedded with a price.

“It’s not like she can raise her prices 3% across the board,” Lancaster said. “The customer will ask why the bookstore is charging $18-plus on a $16.95 paperback. I think she probably did the most responsible thing she can do. She’s going to offset her per-transaction cost because that’s locked in, and she has a personal relationship with her patrons where she can guide them toward cash. You can scale that conversation if you own an independent bookstore.”

Penalties and Pushback

Although the bookstore owner took the right tack, many other businesses aren’t surcharging appropriately.

“I stumbled across this one by accident,” Lancaster said. “It was a restaurant in Montana that I hadn’t been to before, and I wanted to try it out. I got up to the front and there’s a sign that declared, ‘We’re going to surcharge 3.5% on all card payments, both credit and debit.’ But surcharging debit cards is in violation of their card network agreements—you can’t do that.”

A small restaurant or merchant may get away with surcharging on debit cards for some time, but the card networks have increasingly begun to crack down on these infractions. Visa and Mastercard have even utilized mystery shoppers to investigate if a business is compliant with these rules.

If they aren’t, the merchant could face thousands of dollars in penalties, just on the first offense.

“If you persist, you can end up on a blacklist where you cannot accept card payments anymore, and that’s not a place a merchant wants to be if you accepted them in the first place,” Lancaster said. “It’s not an abstract risk; it’s a real one. This restaurant might get away with it for a long time, but it absolutely should not be doing it. It’s in violation of its card network agreements.”

Beyond repercussions from the card companies, there is a substantial possibility that the restaurant’s policies will drive business away. Even if some customers aren’t aware that they can’t be surcharged for debit card transactions, many will resent the extra fee.

If they are aware, it puts the customers in the tough position of having to stand up for themselves over what some may view as a nominal charge.

“Do you want to have this fight with a beleaguered restaurant owner while everybody else is sitting around trying to have their breakfast?” Lancaster said. “I glancingly asked the guy—he wasn’t the owner—who was ringing up my sale, ‘What do you think of the surcharge?’ He goes, ‘I wish we didn’t do it; we get too much pushback.’”

Merchant Dependent

Resistance from customers who are simply using their preferred method of payment—which happens to be the predominant payment type in the United States—isn’t likely to diminish. However, some consumers may endure a surcharge in certain scenarios.

“If they like your restaurant or they like your product, they’ll suck it up,” Lancaster said. “If you’re a coffee shop owner and you’ve got a lot of competitors, you have to be mindful of the cost you’re presenting them for what you deliver. If you’re a specialty person like an RV upholsterer and you’ve got very few competitors, you can pretty much tell people, ‘Hey, this is what it costs to do what I do. Take it or leave it.’”

Although some merchants may be able to surcharge with near impunity, the more that fees mount up, the more likely it is that customers will be deterred. For example, during the recent egg shortage, some restaurants decided to institute a per-egg surcharge.

Much like credit card surcharges, most customers probably understood that the price of their meal was higher because of circumstances outside the business owner’s control. This increased transparency would even allow the customer to choose an item that didn’t include eggs to avoid the fee.

However, the more that customers must be selective about the items they order or the types of payment they use, the greater the chance that the customer experience will be diminished. This could have a significant impact on a local retailer.

“It’s the smaller merchants who are the ones that are most likely to surcharge because the Walmarts and the Targets and the big-box stores of the world can erase it with volume,” Lancaster said. “The smaller merchants are the ones that are more likely to surcharge, but they’re also the ones that are in the most tenuous position with their customers.”

Off the Receipt

There are several factors that small businesses should consider as they seek a balance between offsetting interchange fees and pleasing their customers. First off, they must understand their role.

“Do you know your customers?” Lancaster said. “I don’t mean that in the authentication way. I mean that when a guy walks through the door, do you say, ‘Hey, Wesley, how’s it going? it’s good to see you again.’ If you’ve got that relationship, you can leverage that for, ‘Hey, man, listen, I got to tell you, these card processing fees eat me up. I love having you in the store; I love catering to your tastes. Is there any chance you could bring cash?’”

Most consumers are reasonable, and they understand the concepts of card acceptance. If they have a personal relationship with a merchant, the customer will likely be amenable to shifting from their norm.

Beyond steering customers to other payment types, the cost of card acceptance—like other business expenses—should be folded into the price whenever possible.

If a business must charge a fee, it is often best to itemize the charge by another name. For example, if a bar has bouncers, it could list the charge as a security fee. If a theater troupe rents performance space, it could call the surcharge a facility fee.

Regardless of the approach a business takes, card acceptance costs are best kept off the receipt.

“I call surcharging a perfectly understandable bad idea because that’s what it is,” Lancaster said. “My own personal view is that it’s too risky in any number of ways, but mostly in the customer relationship. If I show up somewhere and I want a product or a service and I can’t pay the way I want to pay, that’s the quickest way to drive my business somewhere else.”

The post A Perfectly Understandable Bad Idea: Why Merchants Should Reconsider Surcharging appeared first on PaymentsJournal.

Credit card issuers move billions of dollars in purchases every day, steering bank strategy, shaping consumer habits, and fueling economic activity. A small group of dominant players handles most of this volume, battling for market share in a space where size, speed, and customer retention drive success. Their scale isn’t just a status symbol—it’s the result of deep infrastructure, bold marketing, and the confidence of millions of cardholders.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Databook, Part 2: Balancing Risk and Reward in a Resilient Economy

Largest Issuers by Credit Card Purchase Volume, 2023 (in Billions of Dollars)

• JP Morgan Chase – $1,164
• American Express – $1,127
• Capital One – $606
• Citi – $592

Source: Discover investor presentation; company financial reports (2024)

About Report

The U.S. consumer credit card market continues to perform well for issuers, but underlying trends signal the need for careful oversight. While cards remain a favored payment method among consumers, profit growth is beginning to taper off, and there’s a noticeable uptick in delinquencies and charge-offs. These warning signs are more pronounced among smaller issuers, who often take on higher-risk borrowers through more relaxed underwriting. A new report from Javelin Strategy & Research explores the key market signals and challenges issuers must monitor as they work to grow their portfolios while managing exposure.

The post Top 4 Issuers by Credit Card Purchase Volume appeared first on PaymentsJournal.

Business-to-business (B2B) payments dominate the global payments landscape, and Visa is launching a platform designed to connect the major players.

The card company noted that its Commercial Integrated Partners program provides an ecosystem that banks can leverage to offer enterprise clients a range of services, including expense management, a mobile app, and tokenization of virtual cards.

In this model, Visa’s APIs are the rails through which banks can both access products from fintechs and embed them into their business clients’ enterprise resource planning (ERP) software. The objective is to deliver a plug-and-play solution that enables all parties to focus their time and resources on innovation and improving the customer experience.

“This is an interesting announcement,” said Hugh Thomas, Lead Commercial and Enterprise analyst at Javelin Strategy & Research. “The most analogous thing I can think of at Mastercard is their Accelerate program, which takes in things like Start Path and Fintech Express. There are a few big differences here, but the biggest one to my mind is the focus on commercial.”

“Where Mastercard’s Accelerate initiatives run the gamut from emerging solutions like blockchain to consumer-focused offerings like P2P payments to B2B stuff, this Visa program is strictly focused on commercial,” he said. “This seems smart to me, because the ecosystem for commercial payments definitely has a shorter and more manageable set of potential partners, and the forces that drive change are totally different from what you see in the consumer world.”

Speeding the Fleet

As an example, Visa spotlighted its partnership with fleet technology provider Car IQ, best known for software that turns a vehicle into a payment credential. Physical cards still dominate the fleet management industry and are often a pain point due to the risk of loss or misuse.

Through Commercial Integrated Partners, a financial institution could provide Car IQ software to its business customers, enabling virtual card payments through a mobile app at fuel stations.

Visa noted that this type of integration reduces the need for extensive supplier onboarding or development and could potentially save a company “18-24 months of due diligence, integration work and project management.”

What it Says on the Tin

For all the potential benefits of this model, financial institutions will likely have concerns about the security of their data once it is shared with more parties. These concerns have become especially prominent following the collapse of fintech Synapse, which left millions of dollars of its bank client’s funds in jeopardy.

To address these concerns, Visa stated that all fintech partners on the Commercial Integrated Partners platform are pre-evaluated and already integrated with the card company.

“The other thing that struck me was the notion of certification,” Thomas said. “Certifying solutions presumes you have the in-house expertise to not only understand your own products but are able to certify their use in others’ products.”

“It’s a great idea in principle—enabling issuers and other partners to avoid 18 months of certification work before they can launch something that will drive spend volume. But in practice, you’re also then on the hook for whether or not the thing does what it says on the tin,” he said. “It certainly says something about the commitment to growing the card network-driven commercial ecosystem that they’re willing to play this role.”

The post Visa Platform Aims to be the Hub for Banks, Fintechs, and Enterprises appeared first on PaymentsJournal.

Americans are holding more private-label credit cards than ever—store-branded cards tied to specific retailers rather than major networks like Visa or Mastercard. These cards, often pushed with promises of discounts or perks, are piling up in wallets across the country.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Data Book, Part 1: Risk and Opportunity Metrics in a Trump 2.0 Business Environment

Number of Private-Label Credit Cards Owned

• 41% of people who own a private-label card own 1 card.
• 28% of people who own a private-label card own 2 cards.
• 23% of people who own a private-label card own 3-5 cards.
• 8% of people who own a private-label card own 6 or more cards.

Source: Javelin Strategy & Research, North American PaymentsInsights (2024)

About Report

The 2025 U.S. credit card landscape appears steady, with economic momentum carrying over from the previous year. However, shifting political priorities under the new administration could introduce policy changes worth monitoring—particularly around tariffs and proposed, though unlikely, interest rate caps. This report from Javelin Strategy & Research—part one of a two-part series—explores the broader economic and regulatory forces shaping consumer credit card programs. It also offers strategic guidance for issuers navigating the evolving environment.

The post How Many Private-Label Credit Cards do Consumers Own? appeared first on PaymentsJournal.

The WSJ reported that Visa is considering a $100 million bid to shift the Apple Card’s network alignment from Mastercard to Visa. While this change will not help Goldman Sachs navigate its way out of its troubled consumer lending issue—which Goldman announced it wanted to shutter back in 2022—the deal illustrates the importance of Apple’s payment technologies.

Apple’s Tech Is Different from Goldman Sachs’ Loan Book

Goldman’s loan portfolio has had its warts. High charge-offs were an issue with the GM co-brand when Barclaycard took over the receivables. Prior to that, the business was run effectively by Capital One, but at Goldman, it saw skyrocketing 10% loss rates. Goldman bought lender GreenSky for $1.7 billion but sold it for half that amount. The Apple portfolio has been on the market, with a handful of top issuers that could absorb the portfolio, but only with rumored interest, despite the $20 billion receivable potentially being discounted by more than $1 billion.

But the Apple technology is what is interesting today. Whether Mastercard ups the ante or not, it illustrates the importance of the wallet and the smooth integration into the mobile device we all know and love. In payments, where transaction volume is key to revenue generation, the tech takes a slice of the processing fee. With some market upsets on the horizon as the Capital One/Discover merger moves along, Visa’s play is aggressive and can add cache to the dominant U.S. credit network.

The Tech Sale Will Not Fix the Credit Card Problem

Goldman reported that its loan loss provisions for Q4 2024 were $341 million, bringing the total for 2024 to $1.348 billion, a 31% increase from 2023. With the economy’s current stress, any portfolio buyer will need to consider the sensitivity to strained budgets and the uncertainty of a recession. (See the latest on credit risk: Seven Credit Card Warning Signs in 2025: Don’t Stop Lending, but Watch Out | Javelin). However, there are still other issues to consider.

Some operational issues extend beyond the tech purchase, affecting total operating expenses. Experienced lenders, such as American Express, Chase, and Synchrony, each of which has been identified as a prospective buyer for the credit-stressed portfolio, understand how to reduce costs and mitigate risk. Issuing expensive metal cards was a cool idea at the time because they are neat, but does a portfolio that drives transactions to a wallet really need to incur the cost? It adds up when receivables have more than a million accounts.

And billing? Innovative issuers will need to fix the fact that all Apple cards bill on the first of the month, which creates call center havoc, rather than the practical 20 billing cycles most banks use to load balance statement rendition and call center volume.

What’s Next

If Visa is considering an offer, you can be confident that Mastercard is appraising its future interest. For both firms, which are top global payment technology companies, Apple is a plum client. For Apple, $100 million is a significant amount of money, but with $53.8 billion in cash on hand and a market cap of $3.4 trillion, it won’t move the needle. The big question remains: how do you put the $20 billion Apple receivable into the hands of a top lender that can generate a profit from the extensive portfolio? And the next question becomes will the Apple credit card standards get tightened, redefining their 1984 Macintosh tagline “…for the rest of us.”

The post No Buyers for the Apple Card, but the Technology Is Hot appeared first on PaymentsJournal.

Credit card issuers are navigating a landscape filled with macroeconomic challenges, regulatory uncertainty, and financially strained consumers. Unfortunately, the road ahead remains uncertain, making it critical for issuers to take proactive measures to protect themselves as charge-offs and delinquencies mount.

In the Credit Card Databook, Part 2: Balancing Risk and Reward in a Resilient Economy report, Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research, detailed the challenges plaguing the credit card industry and the steps issuers can take in the face of increasing uncertainty.

Higher Rates, Higher Risk

The report delved into the macroeconomic factors impacting the industry—from unemployment to inflation. High interest rates have also posed a key challenge for both consumers and organizations.

Though the U.S. Federal Reserve has kept rates high, it has recently considered rate cuts that would lower the prime loan rate for banks, potentially reducing credit card interest rates.

“There’s a whole art and science as to when to initiate those cuts,” Danner said. “Credit card interest rates have skyrocketed into 23% to 24% range. The Fed started to cut rates, so they’ve been coming down slowly. That’s offered a bit of breathing room for consumers, especially since credit card balances have been historically high.”

The historic level of consumer credit card debt did not abate in the latter half of last year, leading to an increase in delinquencies and charge-offs. As a result, credit card issuers are closely monitoring the number of customers making full balance payments.

“Everyday consumers are holding on to these record-level high balances at these high interest rates, so there’s going to be a lot of pain with revolvers and in vulnerable segments,” Danner said. “We’ve seen a rise in the amount of customers that are making only the minimum payments, which is a little scary because it means they’re revolving. It’s a number you don’t want to see go up.”

A notable discrepancy exists between large and small banks. Many regional banks have different value propositions than their larger counterparts and, as a result, often maintain lower underwriting standards.

For this reason, smaller banks typically experience higher delinquency rates on credit cards than larger banks. This has led to surge in delinquencies, with smaller banks reaching over 7.5% in their card portfolios compared to 3% for larger financial institutions. The gap is even more pronounced because most larger banks are better equipped to weather these challenges.

A Mantra of Uncertainty

Credit card issuers are also braving a regulatory environment with little certainty moving forward. In recent years, several proposed rules could directly impact the industry, such as the Sanders-Hawley bill, which would cap credit card interest rates at 10% for a five-year period.

“That would have severe consequences,” Danner said. “Interest income is a huge piece of how credit card programs operate, and if you were going to cap that at 10%, that would have very significant consequences for programs. You could see things like increased annual fees on cards, declining rewards programs, and you could even see some programs going away entirely because they wouldn’t be able to fund it.”

There have also been recent discussions about reviving the Credit Card Competition Act, which was designed to curb the market dominance of Visa and Mastercard. The bill would require issuers to provide retailers and organizations with an alternative card network not operated by the credit card giants, potentially leading to substantial industry shifts.

Additionally, a new presidential administration in the U.S. brings further uncertainty, as many of its initiatives could directly affect the credit card industry. For example, several actions by the Consumer Financial Protection Bureau (CFPB) have been shelved or eliminated, leaving the future of these efforts in limbo.

“It’s the mantra that we’ve been using, but there is still a lot of uncertainty out there,” Danner said. “Even the idea with all these tariffs on some of our closest trade partners, that could have profound changes. It could trickle down into higher prices for consumers on goods, and higher prices means potentially less spending because consumers are tightening their wallets. It’s a cascading thing with some of these economic topics—it gets complicated quickly.”

Tightening Standards

With so much doubt, it has become clear that risk management is a central priority for credit card issuers. This has already been reflected in originations, where issuers are tightening their underwriting standards. As a result, fewer subprime and below-prime customers may be approved for credit cards in the coming months.

“The other tool they have in their toolkit is the way they can adjust the credit lines,” Danner said. “Overall, over the past year or so, credit line increases have been declining. They’ve been tightening the amount of available credit that they’re putting out to customers. It’s just another way of mitigating risk ever so slightly, although it’s less refined.

Many card issuers have fewer mechanisms in place to decrease credit lines than to increase them, even though credit line reduction programs are an important risk management tool. If a customer is struggling to pay their bill, it’s critical to have a program that can reduce their available credit, as this helps limit the bank’s exposure on that card product.

The overarching trend in the credit card industry toward tightening controls was confirmed by data from the Senior Loan Officer Opinion Survey conducted by the U.S. Federal Reserve.

“They’ve been somewhat loosening standards over the past year, but might end up tightening up again, particularly as they have to curtail some of these issues with delinquent and charged-off accounts with the higher rates that we’ve been seeing,” Danner said. “Issuers have been looking at all these trends and they’ve been responding. If you’re not responding, maybe now is the time to tighten up your underwriting just a little bit.”

The post Why Risk Management Should be Top of Mind for Credit Card Issuers appeared first on PaymentsJournal.

In the latest clash over card interchange fees, the UK’s Payment Systems Regulator (PSR) has criticized Visa and Mastercard for ratcheting up fees and dominating the card market.

Following a review of UK market conditions, the PSR determined that debit and credit card fees on these payment rails add an extra £170 million ($219.7 million) in annual costs for businesses. Over the past eight years, the regulator also found that Visa and Mastercard have raised their service fees to acquirers by roughly 25% without justification based on costs, competition, or innovation.

“The switches can be a bit of an easy target,” said Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research. “When global multinationals are put in contrast to small businesses in a given country it can certainly seem like big beating up on small, but I would say these fee structures are not pulled from the air—they’re designed to create an appropriate balance between the needs of the merchant and the needs of the issuer.”

“The issuer is effectively being asked to cover risk that the cardholder buys something and doesn’t eventually pay for it,” he said. “The card is meant to be an encouragement to spend more on a given visit, i.e. more than the cash you might have in your pocket. The merchant realizes the benefits of not having to manage credit and not having to account for countless cash drop-offs.”

Reconciliation Outside of Regulation

Despite the benefits card networks offer merchants, the interchange fees they charge have been controversial. In the U.S., a $30 billion settlement between Visa and Mastercard and merchants—largely based on interchange fees—was tabled after a federal judge determined the settlement amount was too low.

However, the best hope for reconciliation between merchants and card networks might lie outside of the courtroom.

“The regulators don’t want to wade in and legislate outcomes, they want to legislate the circumstances that drive optimal outcomes,” Thomas said. “That is having conversations between the merchant associations and the banks to say, ‘Tell us why you think your pricing is fair or not fair, and we will try—in as not heavy-handed a manner as we can—to ensure that everybody remains happy.’”

The Appropriate Balancing Act

This approach has been successful in areas like Canada, where agreements between card networks and merchants—that are not imposed by regulators—have established processes to periodically review interchange fees and ensure they are priced appropriately.

“It’s a balancing act,” Thomas said. “When you read provocative statements designed to grab headlines, I don’t think you get the full picture of what’s going on. The process should be to hash through the issues such that everybody gets heard and you get the optimal outcome where maybe nobody’s happy, but it’s the appropriate balancing act.”

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Yesterday, The Wall Street Journal reported that the Trump administration had lowered single purchase limits on U.S. government corporate cards to one dollar for most government agencies, effectively rendering these cards useless.

These actions were taken by the Elon Musk-run Department of Government Efficiency (DOGE) as part of an overall effort to improve government efficiency and reduce government spending.

As someone who made his first billion dollars in the payments industry, Musk is an unlikely person to be at the head of this initiative. One might expect him to have a more subtle understanding of the benefits and detriments of different payment instruments, particularly their ability to automate complicated, potentially inefficient processes.

Cards Reduce Procurement Costs

A key benefit from corporate cards, particularly purchasing cards, is their ability to reduce the administrative costs incurred by large organizations when they buy things. They do this by replacing a labor-intensive req-to-check process with post-purchase review and approval, backed by issuer insurances against fraudulent purchases. By the most recent estimate from the U.S. Government Accountability Office (U.S. GAO), paying with a card saves the government around $70 per transaction in administrative costs versus traditional procurement processes. GAO estimates the total savings at around $1.7 billion annually.

For perspective, last year just under $40 billion worth of federal government payments were made using the GSA’s SmartPay program (the umbrella authority for all U.S. Government Corporate Cards). That’s roughly 0.6% of the 2024 federal budget.

While the WSJ notes that exceptions were made for employees making purchase related to emergencies and disaster relief, no additional carveouts were noted. This may be cause for concern, given how these cards are used. In 2024 just two departments accounted for three quarters of all corporate card spend: the Department of Veteran’s Affairs and the Defense Department, two areas of government where it is crucial to have ready access to the tools needed to fulfill the department’s mission.

Costly Workarounds

Already, government employees are trying to figure out workarounds to maintain service levels and delivery times predicated on the ability to forego requisitions and purchase orders with cards. Implications for traveling government employees are obvious (IRS auditors are having to figure out how to pay for travel to on-site audits), but issues of non-travel purchasing may cause even greater problems.

If transactions below a certain threshold must be made using cards, making such low value transactions via other means may not just be hard—it may be impossible. Often procurement software is hard coded to re-route purchase orders to cards below a certain dollar threshold, so that if it can’t be made with a card, it can’t be made at all.

Rather than streamlining government spending, this across-the-board move to halt government expenditures may wind up driving up administrative costs by delaying critical purchases and forcing employees to develop inefficient workarounds. Perhaps more ironic still, a man who helped revolutionize payments by moving them online has effectively crippled one of the government’s most efficient tools for payment.

The post Paperwork Over Plastic: Federal Procurement Card Curbs May End Up Costing More appeared first on PaymentsJournal.

Credit cards have evolved far beyond simple plastic payment cards, adapting successfully to rapidly shifting technologies. However, despite their growing popularity, credit card issuers face three key obstacles this year: a disrupted business model, deteriorating credit quality, and the shifting definition of what a credit card is.

The industry landscape was examined in 2025 Credit Payments Trends, a report from Brian Riley, Director of Credit and Co-Head of Payments, and Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. It outlines how issuers can map out a path to stability, increase net revenue, and leverage artificial intelligence to their advantage.

The Importance of Stability

Persistent inflation and high interest rates weren’t new headlines last year, but they continued to strain consumers. Total U.S. credit card debt reached $1.14 trillion in Q3 2024, according to the Federal Reserve—the highest level in over 25 years of tracking this statistic.

More consumers are now making only  the minimum payment on their credit card bills, leading to a corresponding rise in credit card delinquencies.

“The write-off rate is just around 5%,” Riley said. “The sweet spot in the card business is typically 3.5%, so we’re north of that. It has doubled in the last two years, so that’s a concern. The most important thing the industry needs to do is to stabilize—it is normally in a growth mode, so tempering that a little is important.” 

Uncertainty remains in the market. While some consumer segments are faring well, middle-income households continue to face financial stress.

Beyond economic factors, the credit card industry has been in flux due to a multitude of regulatory efforts. The Consumer Financial Protection Bureau (CFPB) has spearheaded several initiatives, including a rule to cap credit card late fees at $8.  

According to Riley, the good news for issuers is that the CFPB will likely not succeed on the delinquency fee issue in the current political environment. However, card issuers must pay attention to the economy’s fragility and the fact that some businesses are entering uncharted waters.

The CFPB was also the driving force behind the Credit Card Competition Act, designed to reduce the dominance of the Visa and Mastercard networks. The bill would require issuers to offer retailers and organizations an alternative rail to those operated by the credit card giants.

The bill has faced numerous roadblocks. Critics argue that the legislation would prompt major credit card companies to shift funds from consumer rewards programs to merchant incentives and force financial institutions to support networks they don’t wish to offer. Practically speaking, Riley expects the Card Competition Act to fizzle out.

Though these efforts may not prevail, other proposals could dramatically impact the industry—such as the recent push to cap credit card interest rates at 10%. The lingering uncertainty surrounding regulatory changes makes it paramount for credit card issuers to focus on controlled growth, liquidity, and conservative lending practices. 

“We have little expectation that 10% credit cards are on the horizon,” Riley said. “Issuers do not even cover their margins. Consumers with great FICO Scores—such as those between 810 and 850—do not even get priced at 10%, so how could riskier segments get that rate?”

“Lending is an art and a science, but it is also a business,” he said. “The model has to work or there is no reason to lend. First you need to cover the funding costs, then cover operational expenses like people and rewards. Then, you need to carry the cost of charge-offs. Before you know it, the model is upside down.”

Seeking Profitable Growth

Stability allows card issuers to regain balance. It also provides issuers with the opportunity to study how consumers are adapting to higher prices and environmental changes. Once stability is achieved, issuers should shift their focus to revenue—not just increasing gross dollars, but concentrating on net revenue.

The loans that credit card issuers offer are largely based on a risk-adjusted pricing model, with the expectation that the consumer will repay the loan. If circumstances change, however, the issuer is locked into the rate established during underwriting, which may no longer align with the account’s risk.   

“This static pricing model came out of Dodd-Frank, and it does not allow the issuer to recalibrate their risk-based pricing as things change, so it has to be right the first time,” Riley said.

This deterioration in credit quality has had widespread impacts on the industry.

“The profitability of the card business has been on the downswing,” Riley said. “It typically runs in the 4% of assets level. General banking runs more like 1.5%, so cards can be almost three times as profitable. However, after COVID, profitability dropped significantly because people were expecting credit losses. It was in the 3% range for 2023 and we expect that to dip further—probably into the high two level when the final numbers are in for 2024.”

These credit quality issues mean that card issuers must anticipate potential swings before booking the account, continuously monitor the account throughout the relationship, and have a strategy in place for when the account approaches charge-off.

“The story for this year will be that growth is good, but profitable growth is what is most important,” Riley said. “It’s not about getting credit cards out there. There are 220 million people and 600 million cards in the U.S., so quick and dirty math says there’s already around three cards per household. Focusing on the importance of net revenue—not just new accounts—is what’s big.”

Walk, Not Run

For all the recent buzz around artificial intelligence, it’s not entirely new to the credit card industry. Machine learning has been deployed by credit card firms since its inception, especially for fraud detection and credit management. However, there are still plenty of future use cases, such as application approval.

“With those 600 million cards in the U.S., and probably a 15% turn between customers, it means there are a good 150 million customers a year that go through the underwriting process,” Riley said. “A third of the number survive the process, and the other two-thirds don’t, so artificial intelligence can do some work there to improve that.”

AI can also play a role in identifying struggling accounts. Many of the larger financial institutions, such as Citi or Chase, can process roughly one million delinquent accounts a day. They need tools to help them sort through the data and queue accounts to collectors.

In addition, AI could be applied to credit scoring. FICO scores are important gauges for both consumers and lenders, and artificial intelligence could be deployed throughout the cycle to ensure these scores stay accurate.

All in all, AI holds an array of possibilities for issuers, from booking new accounts to workflow management and expanded fraud management solutions. However, the risks associated with this emerging technology mean that issuers should take a measured approach to AI.

“We think that card issuers need to walk on this, not run toward it,” Riley said. “Whatever’s slick and shiny is going to be in place first at the top issuers, but the middle market should not focus on it. Their platform service providers like Fiserv will level the field over time and make sure that they have the competencies they need.”

Instead, small- to mid-market institutions should focus on the fundamentals of solid underwriting, effective credit management, and the operational bottom line this year.  

The post In a Challenging Environment, Credit Card Issuers Should Prioritize Stability Over Growth appeared first on PaymentsJournal.

Younger consumers in Texas are more likely to own credit cards than previous generations at the same age, and they tend to use them more frequently. While this can lead to more delinquencies, it could also result in higher credit scores over time.

The Federal Reserve Bank of Dallas recently examined the credit card habits of Gen Z in the state and found that they use credit differently compared to millennials and Gen X at the same age. Some 60% of Gen Z respondents had at least one credit card in their early 20s, compared with 54.5% of millennials and 57% of Gen X consumers at those ages.

With higher card ownership, Gen Z also uses credit cards more than previous generations. Nearly a third of this generation had a credit card that was 75% or more of its credit limit, which is higher than other generations.

But here’s an interesting twist: when the Federal Reserve Bank of Dallas looked only at those with credit cards—rather than the entire generation—Gen Z fell to the bottom of the list. Just 28% of Gen Z cardholders reached that 75% credit limit, compared to 33% of millennials and 37% of Gen X.

It’s important to note that this data focuses on a small group of consumers from one state, rather than looking at a wider audience. However, these generational differences persist despite other studies showing that younger generations are more rate-conscious. Gen Z, for example, uses credit cards more for shopping and dining, while baby boomers spend more on fuel and hotel lodging. As a result, younger generations are less focused on rewards and more concerned with rates and terms.

The Effects of Higher Usage

Looking at older generations, the Federal Reserve Bank of Dallas found two divergent paths when it comes to credit card usage. Millennials with higher card usage in their 20s saw an average of 21% of their lines of credit become seriously delinquent in the next decade. For members of the same generation who had lower credit card usage rates in their 20s, just 9% of their lines of credit became seriously delinquent.

However, when younger cardholders live within their limits, that additional usage often pays off. Millennials who used credit cards at lower-than-average rates in their early 20s had an average 62-point higher credit score in their early 30s compared to their peers.

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Credit card debt among U.S. consumers reached $1.21 trillion, the highest level on record since the Federal Reserve began tracking the data over 25 years ago.

According to its Q4 2024 findings, credit card balances increased by $45 billion in Q4, reflecting a more than 7% year-over-year increase. At the same time, credit card delinquency rates remained high, with 7.18% of balances reported as delinquent over the last year.

Despite rising credit card balances and increased delinquencies, U.S. consumers continued to accumulate debt throughout the holiday season. More than a third of respondents said they took on additional debt during the period, and nearly half stated these expenses were unplanned. According to LendingTree, the average consumer added $1,181 to their credit card bill in the holiday season, up from $1,028 the previous year.

Continuation of a Trend

Data from the Federal Reserve points to a continuation of an ongoing trend. Not only is credit card debt mounting, but over 10% of consumers are also making only the minimum payments on their balances.

Inflation has been one of the culprits behind the rising dependence on credit cards, a trend that accelerated in the wake of the pandemic. In addition, high interest rates have made carrying a balance even more expensive.

Over the past few years, the Federal Reserve has raised interest rates, causing the average credit card rate to skyrocket over 20%. However, despite the Fed lowering its benchmark rates in the latter part of last year, credit card rates have yet to decline significantly.

Fragile Segments

The strain of rising prices and interest rates has particularly impacted lower-income households. In addition, more retirees—who traditionally live within fixed budgets—have turned to credit cards to make ends meet. According to data from the Employee Benefit Research Institute, over two-thirds of U.S. retirees carried outstanding credit card debt last year, a substantial increase from previous years.

“What is important here is that not all card segments are showing signs of stress, but the most fragile segments—those with low FICO Scores, lower incomes, and less experience with credit—indicate downfield risk in 2025,” Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, told PaymentsJournal.

“When you consider that revolving consumer debt is at an all-time high, the problems of inflation continue to stress household budgets, and issuers must keep a keen eye on vulnerable portfolio indicators,” he said.

The post Credit Card Debt Continues to Mount for U.S. Consumers appeared first on PaymentsJournal.

Q4 spending by American Express’ more affluent customer base rose by 8% year-over-year, driven particularly by strong shopping activity among millennial and Gen Z consumers.

Spending picked up after a 6% growth rate in both Q2 and Q3 2024, according to CNBC. Among Gen Z users, transaction volumes surged 16% in Q4 2024, while millennials saw a 12% increase compared to the previous year.

This spending zeal was largely relegated to younger adults. American Express reported that Gen X spending grew by 7%, while baby boomer billings increased by just 4% in Q4. Despite sluggish spending growth in these groups, Christophe Le Caillec, Chief Financial Officer at American Express told CNBC that the increase in shopping among Gen Z and millennial customers “gives us a lot of optimism for 2025.”

A Concerted Effort

American Express has made a concerted effort to appeal to younger age cohorts, a strategy that seems to be paying off. Many of Amex’s young consumers are diving straight in with premium cards, like the $695 annual fee Platinum card, rather than starting with no-fee options.

Gen Z and millennial users exhibit a higher comfort level with membership and subscription fees, recognizing the value American Express provides beyond the cost. For example, the Gold card offers 100,000 membership rewards points after spending $6,000 on eligible purchases within the first six months and 20% back in statement credits made at restaurants during the initial period.

These promotions are attractive to younger adults who are often in search of experiences, as opposed to physical products. According to Le Caillac, Amex’s restaurant and travel rewards are making an impact—travel and entertainment billings rose 11% in Q4 24, compared with 8% for good and services. Much of the Q4 2024 boost in the travel segment came from airline spending.

Highly Sought After

The Gen Z and millennial customer base is highly sought after because they typically have higher incomes and credit scores than older cohorts. Many Gen Z consumers have also started investing at an earlier age than previous generations. Gen Z is highly tech-savvy, and their investment habits have been influenced by social media and gaming.

Though Amex has already shifted its strategy to reach this cohort, the wealth management industry has struggled to accommodate the preferences of the new generation of investors. Younger adults are looking for digital-first solutions that are tailored to their unique demands, and financial firms in all industries must acknowledge these preferences and adjust their strategies accordingly.

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Many consumers are sticking to just the minimum payments on their credit card bills, according to a recent report from the Federal Reserve.

The data, covering through Q3 2024, revealed that over 10% of consumers were simply getting by, continuing a three-year trend. As average credit card interest rates have surged, delinquencies have also risen, reaching their highest point in over a decade.

“The economy is still in tender shape and credit card managers should be aware that there are subtle elements that drive risk,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The current trend of increased consumers paying only the minimum due is a predictive metric that illustrates household budgets are under continued stress.”

Downfield Risk

The lingering impacts of inflation have put pressure on consumers for years, and there has been much speculation about whether these conditions will persist or if improvement is imminent.

To provide a clearer picture of consumers’ situation, Riley highlighted two salient indicators from the Federal Reserve data:

• 30-day delinquency rose by 10% to 3.52% in Q3 2024, signaling continued deterioration in new delinquent accounts.
• The number of consumers making only the minimum payment during this period climbed to 10.75%, up by 9%.

“What is important here is that not all card segments are showing signs of stress, but the most fragile segments—those with low FICO Scores, lower incomes, and less experience with credit—indicate downfield risk in 2025,” Riley said. “When you consider that revolving consumer debt is at an all-time high, the problems of inflation continue to stress household budgets, and issuers must keep a keen eye on vulnerable portfolio indicators.”

Long-Term Solvency

Concerns about mounting credit card debt were brought forward in the results of this year’s DFAST stress tests, which were designed to measure how major U.S. financial institutions would respond to a hypothetical set of negative economic events.

The tests found that banks would face total credit losses of roughly $684 billion, with $175 billion from consumer credit card losses alone. These indicators suggest that credit card firms should prioritize long-term solvency over short-term profits.

“Credit card issuers surely make increased income when consumers pay only their minimum due payments, but the revenue is short lived when chargeoffs move towards 6% to 7%,” Riley said. “That is far beyond the 3.5% comfort zone issuers managed two years ago.”

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Consumers accustomed to swiping their Capital One cards during overseas travels could face issues once the credit card giant transitions its network to Discover.

Currently, Capital One’s card payments are processed on networks operated by Visa and Mastercard. After the acquisition of Discover was approved in December by the Office of the Delaware State Bank Commissioner, Capital One said it plans to move its payments processing to Discover’s rails.

This change is unlikely to have a significant impact in the U.S., where Discover’s network is nearly as ubiquitous as Visa, Mastercard, and American Express. However, Discover is far less common outside the U.S, potentially causing  payment processing issues for U.S. travelers using Capital One cards abroad.

Forging Ahead

Despite these hurdles, Capital One is forging ahead with plans to move all its debit cards and some of its credit cards to Discover’s network as early as Q2 2025. The company also hopes to migrate a larger portion of its credit card business to the Discover network in the future.

“In total, across debit and credit, we expect to add over 25 million Capital One cardholders and over $175 billion in Capital One purchase volume by 2027,” said Richard Fairbank, CEO of Capital One, at an investor presentation last year. “This injection and volume in the network will help Discover be competitive with the leading network.”

Pledging Investments

The centralization of financial services among a few major players has been a key driver of opposition to the merger. Capital One’s acquisition of Discover, valued at over $35 billion, will make the combined company the largest card issuer in the U.S. The deal will position Capital One with approximately $250 billion in card balances, reflecting a 22% increase in market share.

In order to mitigate some of the concerns surrounding the highly scrutinized acquisition, Capital One recently pledged $265 billion in lending, philanthropy, and community investments if regulators approved the deal. The company stated that this commitment is twice as large as any other community benefits plan of its kind.

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Financial institutions are exploring new ways to attract younger savers, and their payment habits are evolving in turn. Credit cards have now edged out debit cards as the preferred choice, even among younger generations. Additionally, digital wallets and peer-to-peer methods like Venmo and PayPal are gaining significant traction in this demographic.  

Velera’s Eye on Payments study, a comprehensive annual assessment of payment choices among credit union members and other financial institutions, examines how these trends shift over time. Now in its seventh year, the research delves into the factors shaping consumer choices across various payment methods, with a particular focus on how these preferences evolve at different life stages. 

In a recent PaymentsJournal podcast, Velera’s Tom Pierce, Chief Marketing & Communications Officer, and Norm Patrick, Vice President of Velera’s Advisors Plus, discussed the findings from this year’s survey with Brian Riley, Co-Head of Payments for Javelin Strategy & Research. They also explored how credit unions can leverage these insights to better serve their members.

Credit Over Debit

After five years of debit cards dominating payment preferences, Velera’s research reveals a notable shift toward credit. This year, 37% of respondents indicated a preference for using credit at the point of sale, surpassing debit at 35%. Relatedly, 40% of credit union members reported applying for a credit card within the past year.

Source: Velera’s Eye on Payments 2024 report

Among younger demographics, the trend is even more pronounced. Half of both older and younger millennials, as well as Gen Z respondents, stated that they had applied for a credit card in the last 12 months. Velera’s findings show a 40% preference for credit as the primary payment method within these younger age groups.

“That generational flip is really important in the credit union industry because of the aging membership,” said Riley. “Being able to react and have the right offerings in place for the younger generations is something that’s essential for credit unions.”

Other Payment Methods

Mobile wallet usage has seen a significant surge in recent years. The percentage of respondents using a mobile wallet at least a couple of times a month jumped from 27% in 2022 to 34% in 2023, and this year, that figure rose to 50%. Overall, about 60% of credit union members plan to implement mobile wallets within the next six months. Not surprisingly, the lion’s share of this activity is driven by younger consumers.

Source: Velera’s Eye on Payments 2024 report

This demographic also expresses strong concerns about fraud and identity theft, highlighting the importance of engaging with them to build trust and increase their comfort with the fraud prevention tools issuers offer.

Another payment method that has experienced a substantial increase is peer-to-peer (P2P) payments. Just 12% of respondents reported using P2P as a primary payment method in 2023, but that number more than doubled in 2024, rising to 25%.

“As we look at the younger generations, there are a lot more people who are using P2P as a primary method,” said Patrick. “It’s important that they be educated with the ins and outs of using those different solutions. When you have money sitting in your Venmo account, it is outside of the financial institution. It may not be insured, and it may not be a fraud check for losses.

“With the boomer generation, there isn’t a ton of interest in P2P,” he said. “In fact, 62% of those surveyed said they do not use P2P type of methods at all. But that means that there is some that do, and there could be some opportunity to encourage them to do more.”

Design for Living

Card design is also top-of-mind. In fact, more than half of credit union members said that card design influences what type of card they choose to use on a regular basis.

“That was up from 39% last year, and we were pretty amazed with the number last year,” said Pierce. “It seemingly has taken place overnight.”

These design preferences can include various factors, such as the material of the card, its overall design and whether it offers contactless payment capabilities. Is it made from sustainable materials? Is it sleek? Or perhaps an affinity card that showcases their favorite sports team?

Card design is an especially important consideration for younger consumers. Among Gen Z respondents, 82% indicated that the design of the card was a key factor in their decision-making.

“At the end of the day, it’s a billboard for the financial institution,” said Riley. “It’s important to have that card engineered properly with a good-looking design, and have all the features that you’d expect, such as chip and pin and the contactless tie-in.”

Taking a Holistic View

Given the growth in credit card usage, it’s an important time for credit unions to look at their card programs holistically. Credit unions are increasingly targeting younger generations, and more than half of this group said they applied for a credit card in the past 12 months.

“How easy is it at your credit union to apply for a new card?” asked Pierce. “You’ve got to look closely at that and make sure you have a quick and effective origination process. Offering a good reward structure and customizing that card so it appeals to a wide range of age groups is also essential. And certainly, tying back to the younger group is an urgent need across the board.”

For more of these insights and to see the full results of the study, DOWNLOAD THE WHITE PAPER at Velera.com.

The post Shifting Trends: Credit Cards and P2P Payments Take Center Stage appeared first on PaymentsJournal.

The average interest rate for retail credit cards has reached a record high of 30.45%—well above the average rate for general-purpose credit cards, which is about 21%.

The priciest cards now top out at a 36.99% interest rate, according to a survey from Bankrate. Among the cards in this range are those from Big Lots, Burlington, Good Sam, Michaels, and Petco. However, some retailers are still offering more reasonable rates, such as Costco at 20.49%, Bass Pro Shops at 21.12%, and IKEA at 21.99%.

Retail credit cards have traditionally been products with softer underwriting standards. It’s common to make a purchase at a department store and be encouraged to apply for a credit card, as if shopping at the retailer alone were enough to qualify.

A True Profit Center

To offset the risk of anticipated cardholder defaults, retailers charge higher interest rates. While issuers have to deal with higher delinquency rates, credit card programs also represent a major profit opportunity for retailers. For example, Macy’s has reported that nearly half of its operating profits are derived from its credit card business.

“Cardholders won’t pay an annual fee for a store card and the retailers that offer the cards want the highest possible approval rates,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Maximizing approval rates means taking customers that a bank might decline for a Visa or Mastercard. As you reach down the FICO score band to than next tier of customers, higher charge-offs come along with that territory.

“This is also why you always see a store card offered with a promotion—open a Home Depot card and take 10% off your first purchase, or they’ll offer no interest for the first 12 months,” he said. “The added benefits are there to attract creditworthy customers to apply. If the only people who apply are the ones that need credit, either because their other cards are maxed out or because nobody else will approve them, the card portfolio ‘deselects’ and losses soar.”

Tracking the Spread

The rates on retail credit cards tend to follow the trends of general purpose credit card rates. While the spread is now about ten percentage points, that difference can vary based on factors such as the minimum FICO score required for approval, the average purchase size, and the percentage of cardholders who carry a revolving balance.  

Apgar estimates that around half of all store cardholders carry a balance from month to month, compared to 40% of general-purpose cardholders.

Other interest rates are also inching higher as well. This week, the average rate on a 30-year mortgage in the U.S. rose to 6.84%, its highest level since July.

The post Why Store Credit Card Rates Are Staying So Stubbornly High appeared first on PaymentsJournal.

It is a fact that our world continues to become an increasingly digital one, with many once ubiquitous physical objects being retired as relics of the past. Consider road maps, for example—most of us haven’t used them in years, and younger generations likely never will, thanks to digital navigation tools like Google Maps and Waze. Yet, despite the rise of digital solutions, there remains a strong appetite for experiences that blend physical, sensory, and human elements.

Certain physical formats, such as board games, continue to thrive. In an era saturated with digital gaming, traditional board games have not only retained their popularity but are even experiencing market growth, projected to more than double in value between 2024 and 2032.

When Physical Meets Digital: Creating Memorable User Journeys

In other cases, physical and digital formats are combined to create compelling user experiences. IKEA, for instance, leverages augmented reality to help customers visualize furniture in their homes, enhancing a predominantly physical experience with a digital twist. Similarly, companies like Chatbook enable users to create physical photo books from photos stored on smartphones or social media platforms, blending a primarily digital experience with a tactile component.

Leading the Charge: How Gen Z is Driving Digital-Physical Integration

Unsurprisingly, younger consumers are at the forefront of this transformation. Last year, 39% of Gen Z clothing buyers in the U.S. discovered new brands or products via social media. However, as Shopify aptly notes, “although consumers expect a digital-first shopping experience, they also crave connection.” This sentiment extends to banking, where 70% of U.S. Gen Z’ers visited physical bank branches in 2023 to access banking services. In an increasingly digital world, “the human connection is still the differentiator in building trust.”

Reflecting on the Future: How Big- and FinTechs Are Merging Cards with Digital

As Gen Z—digital natives—favor a blend of digital and physical experiences, FinTech companies like Trade Republic seem to have found the sweet spot. Trade Republic, which recently launched its retail banking service, combines an almost entirely digital experience with a striking physical metal card featuring a reflective surface that acts like a mirror. Each time the customer uses the card, they see their own reflection. In an era of hyper-personalization, it’s hard to imagine that one can take personalization further than enabling the cardholder to see themselves reflected in the surface of the card each and every time they use it. Similarly, Apple has blended digital and physical experiences, introducing the Apple Pay digital wallet in 2014 and following it up with the physical Apple Card—crafted from titanium—in 2019.

Physical Cards as a Gateway to Digital Security

Another innovative approach to the merging of digital and physical is the use of physical cards for cold storage of digital assets and secure authentication. By embedding private cryptographic keys into the card’s chip, users can tap the card on a smartphone to self-custody and control their digital assets, keeping their funds safe from hacks and account freezes. At the same time, this physical card can provide a cryptographically secure, password-free user experience for authentication, eliminating the need for vulnerable SMS codes or OTPs. This technology not only secures transactions but can also reduce false declines and prevent account takeovers, making the physical card a key to secure, modern digital life. The card becomes your key to securing your digital life and asset.

Unlocking Tomorrow: Merging Digital and Physical

Looking ahead, it seems that the most successful innovations in banking and payments will be those that seamlessly integrate digital and physical elements, leveraging the unique strengths of both.

The post The Hybrid Consumer: Embracing the Best of Both Digital and Physical appeared first on PaymentsJournal.

Co-branded credit cards have become a powerful tool in the financial and retail industries, offering a blend of targeted rewards, brand loyalty incentives, and exclusive perks that appeal to a broad range of consumers. These cards, created through partnerships between financial institutions and retail, travel, or lifestyle brands, attract applicants by aligning their benefits with specific consumer interests. What attracts applicants to co-branded cards?

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Co-Branded Credit Cards 2024:Top Issuer Market Review

Top 4 Most Important Factors for Co-Branded Card Applicants

• 73% – An attractive points/rewards program
• 72% – No annual fee
• 66% – The card had strong fraud protection features
• 60% – Low APR (interest rate)

Source: Javelin Strategy & Research, North American PaymentsInsights, 2023

About Report

Co-branded credit cards represent a significant and growing share of the U.S. consumer credit market, highlighting their importance to both consumers and businesses. These cards are key tools for fostering stronger connections between customers and partner merchants, offering tailored benefits and rewards that drive engagement. Research into the portfolios of 12 major issuers reveals that co-branded cards account for an impressive 62% of consumer credit card offerings, underscoring their strategic appeal to both issuers and merchants, while enticing consumers with attractive reward structures.

This Javelin Strategy & Research report provides an in-depth exploration of this dynamic market segment. It delves into the mutual advantages for issuers and merchants, analyzes market positioning strategies, identifies the consumer demographics most drawn to these programs, and examines the regulatory considerations shaping their development.

The post What Attracts Co-Branded Credit Card Applicants? appeared first on PaymentsJournal.

Small credit card issuers are facing a significant challenge in today’s economic environment as charge-off rates rise across the industry. Unlike larger, well-capitalized institutions, smaller issuers often have less flexibility in managing credit risk, which can make even a slight uptick in charge-offs more impactful to their bottom lines. As charge-offs continue to climb, understanding these dynamics is crucial for smaller players aiming to stay competitive in a turbulent market.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Issuance by Small Issuers: Strategies, Risks, and Options

Credit Card Charge-offs as a Percentage of Receivables for Small Issuers

• Q4 2020 – 5.68%
• Q4 2021 – 4.51%
• Q4 2022 – 6.95%
• Q4 2023 – 9.5%

Source: Federal Reserve Bank, Javelin Strategy & Research estimates, 2024

About Report

In today’s financial landscape, payment cards have become essential for banks, credit unions, and financial institutions of all sizes to remain competitive. With nearly 600 million credit cards circulating in the U.S. and over 230 million adults using them, credit cards are a primary method of household lending. However, smaller banks and credit unions face substantial competition from major institutions that dominate the credit market. To bridge this gap, some smaller financial entities are turning to agent bank partnerships, which allow them to offer credit programs without bearing the full operational load.

This report by Javelin Strategy & Research provides an in-depth analysis of the credit card market, segmented by institution size, assets, and deposit levels. It also highlights the performance disparities among institutions and examines the agent bank model as a strategic option to support credit offerings for smaller banks and credit unions.

The post How Many Charge-Offs Are There for Small Credit Card Issuers? appeared first on PaymentsJournal.

In an era where consumer expectations and environmental consciousness are reshaping industries, payment cards are also undergoing a transformation. With an increasing shift toward sustainability, financial institutions and card issuers are rethinking the materials and designs of their cards. From recyclable options to customized designs that reflect consumers’ values, this trend not only minimizes environmental impact but also enhances customer engagement by allowing individuals to make choices that align with their personal and ecological preferences. How many cards to consumers have?

As payment card programs evolve, sustainability is becoming a key differentiator in an industry that traditionally relied on single-use PVC cards. Financial institutions are moving away from this outdated material, instead exploring alternatives like recycled plastics, biodegradable options, and even digital wallets as they embrace greener solutions. Beyond materials, customizable designs offer consumers a unique way to express their values, aligning their financial tools with their personal beliefs. This shift not only reduces waste but also encourages a more responsible consumer culture, with cardholders now empowered to support sustainable practices through their everyday transactions.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Eco-Focused Payment Cards: It Pays to Be Green.

Mean Number of Cards per Customer, by Type

• 2.6 – Major credit card usable anywhere
• 2.3 – Store branded credit card
• 2.2 – General-purpose prepaid reloadable cards
• 1.8 – Major debit or check card usable anywhere
• 1.7 – Co-branded credit card

Source: North American PaymentInsights, 2023

About Report

As financial institutions and card issuers commit more fully to sustainable practices, they’re introducing card programs that prioritize environmental impact. This includes the use of innovative, recyclable materials for physical cards and unique, customizable design options that allow consumers to express both individuality and eco-conscious values.

The recent report from Javelin Strategy & Research examines how traditional single-use PVC cards, which have long dominated the market, are giving way to more sustainable alternatives. It also explores how card issuers are appealing to environmentally aware consumers through card features that emphasize eco-friendly benefits and personal expression.

The post Top 5 Payment Card Types used by Customers appeared first on PaymentsJournal.

Retail credit cards are a common way for retailers to attract and retain customers, but the skyrocketing APRs on many of these retail cards can quickly negate their incentives.

Data from Bankrate found that the average APR for retail credit cards has hit a record-high 30.45%, far above the average consumer credit card rate of 21%. The report was based on a survey of 108 store cards from leading retailers.

“The typical retail credit card has always been a product with easier underwriting standards, however, the tradeoff is higher rates on the consumer side and higher delinquency rates on the issuer side,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “With rates on private label retail cards reaching above 30%, consumers that revolve are really going to feel the pain.”

Paying in the Long Run

Although many retailers offer incentives like a 20% discount on the initial purchase, if the customer carries a balance and only makes minimum payments, they end up paying far more in the long run. This is especially true at retailers like Big Lots, Michaels, and Petco, where retail cards carry APRs of 35.99%, the highest among the retailers surveyed.

Another common offer is 0% interest for a set number of months. However, if a consumer doesn’t pay off their balance by the end of the promotional period, they may be charged interest retroactively for every month within that timeframe.

Other Options

For disciplined customers, retail credit cards can be a powerful tool to cut costs. However, the risks tied to high interest rates have driven many consumers toward other options like buy now, pay later loans or debit cards. Still, there is the possibility that the current surge in credit card APRs may be a short-lived phenomenon.

“According to data from Javelin Card Bench, retail cards have some of the highest rates among co-branded credit cards as well,” Danner said. “Those APRs are tied to the prime rate, which continues to remain elevated at 8.5%. We are expecting rate cuts to begin soon, and interest rates will begin to decrease accordingly.”

The post Retail Credit Cards Offer Introductory Perks and Soaring APRs appeared first on PaymentsJournal.

Inflation, high interest rates, and rising unemployment have put considerable pressure on consumers, which has created challenges for Ally Financial.

At a New York financial conference, the bank’s Chief Financial Officer Russell Hutchinson told investors that the economic picture has forced consumers to hold off on taking out loans. Borrowers are also more likely to default, especially on car loans—delinquencies and net charge-offs rose over the past two months in Ally’s auto-loan business.

Hutchinson said Ally will continue to underperform based on the number of borrowers that are now delinquent beyond 60 days. The company expects that number to expand given the state of the U.S. economy.

Shoring Up Lending

Despite its auto-loan issues, Hutchinson said Ally’s credit card portfolio was in good shape and performing as expected, but that was only after the bank noticed elevated net charge-off rates last year and made moves to shore up its credit card lending.

Earlier this year, the company sold its point-of-sale financing portfolio to Synchrony, which includes installment loans similar to buy now, pay later. That deal included loan receivables worth $2.2 billion.

Stress Tests

Ally’s struggles were presaged by this year’s Dodd-Frank Stress Tests, also called DFAST assessments. Every year, the largest banks undergo evaluations to determine how they would respond to a significant economic event, like the pandemic, the 2008 Financial Crisis, or skyrocketing unemployment.

Ally Bank passed this year’s evaluation, but the company’s consumer-centric lending portfolio put it in jeopardy—the bank was the lowest performer in the assessment. In the event of a severe economic downturn, Ally could lose over 40% of its portfolio. Unfortunately, declining economic conditions have made the DFAST scenarios less hypothetical.

“All the economic indicators point to a tough year next year,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, in a previous conversation with PaymentsJournal. “Inflation is still high, and even though interest rates are likely to decrease somewhat, they won’t drop back to where they were a few years ago. Salaries haven’t gone up as quickly as prices have, and all those factors are weighing on consumers. The takeaway is all the banks passed the stress tests this year, but next year it could get ugly.”

The post Tough Economic Environment Is Causing Credit Challenges at Ally Financial appeared first on PaymentsJournal.

Full Disclosure: I love my iPhone. It is a paid-in-full iPhone XS Max that is six years old and works like a champ. Sooner or later, Apple will stop updating the device, but until then, my investment is on the right side of the power curve. I also have an Apple credit card. It has never had more than $80 posted in a month. I used the physical card only once and never paid any interest. 

The Sour Apple Card

When it re-vamped its credit card co-brand, initially with Barclaycard, and then moved to Goldman Sachs, it promised it was a “new kind of credit card created by Apple and designed to help customers lead a healthier financial life.” 

However, for Apple’s partner, Goldman Sachs, the credit card was a new kind of business line, but it became a less-than-healthy financial investment for Goldman. The WSJ covers the latest turmoil, as Goldman Sachs offloads their failed GM credit card and wonders what to do with its $17 billion Apple card receivable.

The title sets the stage, as the WSJ frames the story: “Goldman’s Credit-Card Exit Hampered by Lax Lending Standards” subtitled “The bank lent loosely on some credit cards, contributing to a big loss as it tries to sell the General Motors card business.”

First, Get the GM Mess Out of the Way

Ouch. More than 2x the current chargeoff trend, says the WSJ. Things did not look this way when Capital One owned the GM co-brand.

• Average charge-offs on the Goldman-originated accounts, which make up roughly one-third of the GM portfolio, surpass 10%, the people said. 
• In contrast, the annualized credit-card charge-off rate for commercial banks in the U.S. was about 4.5% in the second quarter of the year, according to Federal Reserve data. 
• The partnership has roughly $2 billion in balances.

The Apple Portfolio is Nine Times Larger Than the GM Portfolio

• The far more challenging deal to offload will be the Apple partnership, where credit-card balances total around $17 billion. Apple sent Goldman a proposal late last year to exit from the contract within 12 to 15 months, the Journal reported, which called for an end to the credit-card partnership the companies launched in 2019 and the savings account they rolled out in 2023. 
• Goldman could be facing a bigger loss when it sells this credit-card program to a new issuer than what it is now expecting to incur with the GM sale.

Where This is Going

Call me old-school, but credit quality matters. It has to be earned through the blood, sweat, and tears of rigorous standards and discipline. Goldman Sachs has a mess on its hands, and we think the worst is yet to come.

But for me, I’ll take my 6-year old, paid in full iPhone anytime. And, I will keep my 800 FICO Score, too.

As to breakups in co-brands, read our latest here: Disbanded Co-Brands: When Credit Card Joint Ventures Fail | Javelin (javelinstrategy.com)

The post Everyone Can Use an iPhone, But an Apple Card Isn’t for Everyone appeared first on PaymentsJournal.

Every year, the top U.S. banks undergo thorough stress tests of their lending portfolios to identify potential risks under stressful economic conditions. These DFAST evaluations are required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed to mitigate financial crises like the Great Recession.

The stress tests measure how each financial institution would respond to a hypothetical set of economic events. Although all the banks passed this year’s evaluation, the results highlighted that rising credit debt is becoming an alarming risk for banks, especially given that economic conditions are expected to worsen before they improve.

In his report, DFAST in Credit Cards: No Stress Now; Next Year Maybe, Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, analyzed the results of the DFAST assessments and detailed the actions banks can take to prepare for the challenges to come.

The Risk Item

Under the adverse conditions of the DFAST tests, banks would face total credit losses of roughly $684 billion. Consumer credit card losses would amount to $175 billion, the highest among all lending segments. Excluding trading losses, credit cards would account for almost a third of all losses in the simulated economic downturn.

Some of the stressed conditions impacting consumers include housing prices and gross domestic product (GDP). For instance, the stress tests simulated a scenario where housing prices fell over 30%, similar to the decline experienced during the 2008 financial crisis. While GDP also effects consumers, it’s not the central factor in this context.

“In the world of consumer credit, unemployment is the big driver,” Riley said. “When unemployment goes above 10%, as it did in the pandemic and the financial crisis, credit card charge-offs skyrocket. During COVID, some of the best-run banks lost $1 billion per month, and there was nothing they could do. That’s why the stress tests used 10% unemployment as a yardstick, because it represents a realistic worst-case scenario.”

The Top Performer

Not every bank faced the same outcome in the simulation. American Express emerged as the top performer in the credit card industry, exhibiting the lowest charge-off rate under the stressed conditions of the DFAST assessments.

In the simulation, American Express experienced a 10.1% loss of its portfolio, compared to a median loss of 18.6% among its competitors. At the other end of the spectrum was Ally Bank, which would incur a loss of over 40% of its portfolio.

“Credit card charge-offs are the most significant factor in Dodd-Frank stress tests,” Riley said. “Financial institutions must understand the effects of an economic downturn, tighten lending standards, and prepare their operations for delinquency volume before trouble surfaces. It’s essential for banks to spend substantial time in this area operationally. You must have highly trained staff that can negotiate with your customers before charge-offs occur.”

Lending Into a Storm

The DFAST stress tests are built to identify weaknesses in a bank’s lending portfolio and assess their impact on the bank’s liquidity. As last year’s failure of Silicon Valley bank showed, these factors should be top of mind for financial institutions. From operations staff to credit card strategists, every team member should understand three key areas: underwriting, portfolio management, and account controls.

“Credit quality begins at the front end, so the key is underwriting,” Riley said. “This is not the time in the history of the world to start being aggressive with your lending. It must taper down as the economy starts getting worse. You don’t want to lend into a storm unless you can do it strategically, because these issues are lasting longer and going deeper.”

Focusing on underwriting means prioritizing quality over quantity, which includes engaging cardholders with attractive offers while tightening lending criteria to match FICO scores more closely.

Consumers are going to feel stress from economic conditions, which is why it’s critical for banks to build strong customer relationships. However, financial institutions must manage their portfolios more actively in light of rising delinquency volume, which means they must scrutinize new accounts and keep tabs on both active and inactive accounts.

If issues are uncovered, the financial institution should accelerate the collection process to flush out losses sooner.

Getting Ugly

While all the financial institutions passed the DFAST tests this year, the worsening economic environment suggests that the simulated conditions of the stress tests could soon become a reality.

“All the economic indicators point to a tough year next year,” Riley said. “Inflation is still high, and even though interest rates are likely to decrease somewhat, they won’t drop back to where they were a few years ago. Salaries haven’t gone up as quickly as prices have, and all those factors are weighing on consumers. The takeaway is all the banks passed the stress tests this year, but next year it could get ugly.”

The post Dodd-Frank Stress Tests: Good News for Now, Watch for a Rugged 2025 appeared first on PaymentsJournal.

Over the past five years, the available balance on credit cards in the U.S. has shown significant fluctuations, reflecting the changing economic landscape and consumer behavior. As consumers navigated through periods of economic growth, recession, and the aftermath of the pandemic, credit card balances became a critical indicator of financial health and spending habits.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: High-Yield Savings Accounts: An Efficient Way to Fund Credit Card Loans

Credit Card Line Utilization Rates 2020 – 2023

• 2019 – 24%
• 2020 – 21%
• 2021 – 21%
• 2022 – 22%
• 2023 – 24%

Source: New York Federal Reserve Bank, Household Debt and Credit Report (2024)

About Report

Banks involved in credit card lending face unique challenges as they navigate the current financial landscape, with the prime rate at its highest point in decades. As they anticipate possible rate decreases in late 2024 and 2025, banks may need to optimize their loan funding strategies. One effective approach is offering high-yield savings accounts to attract deposits specifically for their credit card programs. This strategy enhances liquidity, reduces dependency on external funding sources, and contributes to a more streamlined business model.

This report from Javelin Strategy & Research highlights the complexities of implementing high-yield savings offerings, noting that these initiatives require careful planning across multiple areas within a bank. The structure of the organization may influence whether the strategy impacts various departments or is managed within the retail banking division. Key decisions include market entry, deposit attraction methods, and whether to manage deposits within the existing core system or through a separate platform.

The post Is Credit Card Line Utilization Increasing? appeared first on PaymentsJournal.

Recent record highs in credit card balances may be attributed to various factors, but research reveals an explanation that hasn’t been extensively explored: ignorance.

Nearly a quarter of Americans surveyed by the LendingClub admit they don’t know their total credit card debt, and almost half are unaware of the current APR on their cards.

Even among those who do know their APR, a third don’t realize that their rate is directly tied to the prime interest rate. This leaves many people unclear about how and why their interest rates change.

Nearly half of respondents surveyed were unaware that their credit card APR rose by over 5 percentage points due to Fed rate hikes between March 2022 and July 2023. More than a third don’t recognize that credit card APRs can fluctuate over time, independent of payment history or credit status.

Read the Schumer Box

Credit card companies are not required to proactively notify consumers of rate changes beyond including the information in statements. As a result, over a quarter of Americans surveyed said they don’t know where to find their interest rate and were unaware that their rates increase after a promotional period ends.

Card issuers, on the other hand, are required to disclose cardholders’ rates.

“Credit card issuers have a responsibility to ensure there is clarity in their disclosures,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The Schumer Box, named after the New York senator, makes it easy and clear to see both interest rates and fees for any card. It is written at about a fifth grade reading level and is hard to miss.”

“If almost half of customers do not know their rates, that indicates more about poor household planning than anything else,” he said. “Borrowers should not fall back by saying they could not find it.  Credit card statements disclose the rates, and fully document charges. Customer service call centers are ready to answer questions on rates and are trained to explain them.”  

The post Too Many Americans Don’t Know Their Credit Card Rates appeared first on PaymentsJournal.

The Federal Reserve Bank of New York released its Q2 2024 consumer debt report, revealing a $111 billion increase in credit card debt compared to last year.

Researchers from the NY Fed told CNBC that credit card delinquencies have also risen, particularly among adults ages 18 to 39. The Federal Reserve attributed this increase to the pandemic, which forced many younger adults to overextend themselves financially.

“When you look at three credit card metrics, it is easy to see that consumer households feel the pain of continued stress from interest rates and inflation,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “The latest NY Fed study indicates credit card debt climbed $27 billion from Q1 to Q2 2024, up 5.8%.  That increase is concerning unto itself, but when you add in rising delinquencies, the number becomes more revealing.”

Seriously Overdue

The NY Fed’s researchers noted that delinquent borrowers are often renters with shorter credit histories and lower credit limits, which increases their chance of missing a credit card payment. Those who missed a payment most cited job loss or reduced income as contributing factors.

“On a year-over-year basis, the number of accounts in serious delinquency, defined as those 90+ days past due, surged from 5.08% of receivables to a worrying 7.18%, representing a substantial 41.3% increase,” Riley said. “This means that a significant portion of credit card debt, 7 out of every 100, is seriously overdue.”

Looming Credit Risk

Intensifying these issues are credit card annual percentage rates nearing all-time highs and inaccuracies in credit scoring, which have allowed some consumers to obtain credit products they aren’t qualified for.

“The more concerning issue is that credit card lenders keep increasing credit lines at a time when credit risk is looming,” Riley said. “Consumer credit card holders have access to a whopping $4.9 trillion in credit lines. Of that number, $1.14 trillion is in use and revolving, and another $3.78 trillion is available.”

“In the last two years, between Q2 2022 and Q2 2024, issuers increased credit lines from $4.2 trillion to $4.9 trillion, which is $700 billion,” said Riley. “Consumers continue to need access to credit to maintain their budgets and they are falling back on credit card debt. That will exacerbate credit card risk, particularly in 2025.”

The post Rising Credit Lines Pose Risk as U.S. Credit Card Debt Hits $1.14 Trillion appeared first on PaymentsJournal.

Cards made from paper and other sustainable materials continue to gain in popularity. In addition to being ecofriendly, paper cards are more cost-effective and perfect for single-use purposes, such as gift cards.

To explore the future of sustainable cards, Peggy O’Leary, EVP, Prepaid and Digital Solutions for CPI, spoke with Elisa Tavilla, Director of Debit Payments for Javelin Strategy & Research, on a recent PaymentsJournal podcast. They discussed the flexibility available to consumers and providers with sustainable cards and looked at where the industry might be headed.

Paper Power

Sustainable cards are being made from a variety of materials, including paper, wood, recycled PVC and other substrates, as well as recycled plastic. All of these are much easier on the environment than traditional plastic cards.

“We’re seeing a greater effort toward fostering sustainability and protecting the environment across all industries,” Tavilla said. “For example, in the retail industry, there’s been greater attention and efforts toward things like consignment, thrifting, upcycling, focused on zero waste. In the payments industry and financial services, we’ve seen efforts to improve sustainability and help the environment, too.”

Single-use type prepaid cards (that is, not reloadable) are ideal for paper. Visa, Mastercard, and American Express gift products have increasingly moved toward paper cards. They are more environmentally friendly than traditional cards, and they don’t need to be as durable as credit or debit cards that people use more frequently. Paper cards are also more cost-effective for manufacturers than plastic cards.

Sourcing Matters

The market has been pushing for assurances that paper products—and even the packaging around the paper products—come from responsibly sourced materials. 

“At CPI, we’re heavily investing in ensuring our materials are FSC-certified,” O’Leary said, referring to the Forest Stewardship Council, a group whose mission is to promote economically viable management of forests. “We’re making sure that our products have a trackable chain of custody and that our paper products come from responsibly managed forests. Not only are we creating something from a natural product that can break down after use, but the source itself is coming from a more ecofriendly supply chain as well.” 

Financial institutions have seen plenty of new investment around environmental, social, and governance (ESG) initiatives, indicating a desire by consumers to minimize their impact on the environment. Many of these customers may not even realize that the plastic cards in their wallet could be replaced by something more ecofriendly. The effort extends to finding partners to ensure that the types of materials used are responsibly sourced as well. That is an important part of CPI’s manufacturing process.

“From the ESG perspective, CPI’s approach and strategy are very thorough and well-rounded, whether it’s from the cards and the products that they’re producing or the sourcing and the supply chain of the material,” Tavilla said. “Consumers are increasingly environmentally conscious of the products that they’re using and the providers that they buy from. A Javelin survey asked the key factors that users consider when they apply for a new credit card, and 26% said that having the card being made of sustainable material is an important factor.”

Expanding Possibilities

Sustainable card manufacturing allows for more than just environmentally friendly transactions. It opens up a new world of design for the cards as well.  

“We have come up with innovative ideas such as gift packages that would have lights that lit up or scratch-and-sniff options for the holidays where you could definitely smell the peppermint,” O’Leary said. “When you think about what it takes to be able to deliver that kind of innovation, you need an extensive network of suppliers, partners, and innovators behind the scenes that help you bring that all together.” 

It’s a misconception that an ecofriendly production means giving up uniqueness or special designs. CPI has developed hundreds of designs suitable for all kinds of occasions and personality types. Indeed, moving beyond simple plastic can give cards a variety of distinctive tactile feels. Special embellishment and designs focus on strong tactile experiences, which consumers love when they’re shopping for gift cards. 

Similar developments can be expected in gift and retail cards. Even though these cards tend to be single use or limited use, consumers sometimes want them to have a certain degree of durability. Some people might leave a gift card in their wallet or in a drawer for months before they redeem it. Cards with a larger amount of funds attached may be used multiple times. 

There are other reasons to look toward more sustainable products. California, for example, has introduced legislation limiting single-use plastics, which could have ramifications across the country. Obviously, it would not be efficient for card manufacturers to produce one card to meet the standards of one state and different cards for other areas. The result is likely to be a standard based on the most restrictive state laws.

For card providers and their customers, these trends are likely here to stay.  

“From a cardholder perspective, it is ensuring that you’re meeting the new requirements that are coming more broadly from your market,” O’Leary said. “From a business perspective, businesses are taking steps to improve their impact on the environment. Overall, you can drive a really positive business outcome, not only from an investment perspective but also to win in the market.” 

The post Paper or Plastic: Sustainable Cards Are the Wave of the Future appeared first on PaymentsJournal.

Getting a college credit card was easy back in the day. Issuers flocked to the segment, which in 1990 represented a block of 14 million people and is currently north of 20 million. I recollect that well-intended parents allowed credit cards to facilitate money movement, meals, and bookstore purchases. Still, the attractive nuisance of a credit card often resulted in free spending and extracurricular purchasing.

In short, the college cardholder was off on their own, and card spending commitments frequently fell prey to help fund beer, pizza, and other delights.

Credit card issuers loved the market. These customers were at a unique stage in life: they are of age but not necessarily grown-up. The cardholder will be off on their own in less than four years and will never forget their first credit card. Hopefully, as their life develops, the new consumer will likely need auto loans, mortgages, personal loans, deposit products, 401k, and wealth management products, making the first lender an essential starting point. The initial relationship with a lender is as sticky as a first boyfriend—you never forget them.

In many cases, parents could keep their kids out of non-payment trouble, which would tarnish their credit bureau file until they were 27 or 28 years old. A few bucks to bail the student out and a stern lecture always seemed to do the trick—at least until the next semester started.

What a deal! I’ve been there, done that, and got the T-shirt. The temptation and potential pitfalls are just a swipe away. That’s why I’m here to share my insights and advice.

The CARD Act of 2008 Changed All This

This CARD Act significantly altered the landscape for college students seeking credit cards. It introduced new requirements, such as an Ability to Repay standard or a parental (or guardian) endorsement, making it more challenging for students to obtain credit cards.

Prudential regulators and consumer protection agencies like the CFPB and FTC are critical to banking. I agree with almost everything prudential regulators say because safety and soundness are essential for the economy. I don’t always agree with consumer protection agencies, but if you think back, they earned their stripes with proper strategies on complaints, product design, and fairness standards.

However, the CARD Act brought a sense of security. It mandated that college students pass an Ability to Repay standard or have a parental (or guardian) endorsement. This parental involvement was a welcome change, ensuring the student’s financial safety and securing a more responsible financial future.

How the Credit Card Right of Passage Changed

In today’s Market & Finance section in the WSJ, the author discusses card changes and explains how old-school college marketing, with tables, balloons, Frisbees, and freebies, went away. Students probably do not miss out on pizza and beer but no longer have access to easy credit cards. However, the card is still essential in establishing a credit line, ultimately leading to a cherished FICO score.

Do What I Did. It is Simpler and Safer, and You Will Sleep Better

Forget about sending a student to college with a credit card in hand or co-signing. Instead, limit risk and load up a debit or prepaid card for them. Living within a budget is an essential life skill.

If you want your child to establish credit, add them as an authorized user on one of your cards early in life. This starts their credit file, and if you limit their access to the card and don’t let them take it off to college, everyone will be better off. It won’t let them get pizza and beer, but it will help them start with a referenceable credit line.

Let them experience a credit card in a controlled situation, build their credit score, and then lock the card in the family safe.

The post College Credit Cards: Getting Pizza & Beer Isn’t Like it Used to Be appeared first on PaymentsJournal.

Not every consumer warrants an Amex Gold Card, a Chase Sapphire, or a Citi Custom Cash Card. With consumer credit so aligned with household budgets, you can be confident that every consumer won’t hold a FICO score of 760 or better. With more than 100 million households having a credit card as a spending option, a good credit manager expects that a portion of the portfolio will face challenges such as unemployment, household discord, indebtedness, and turmoil.

Maybe 5% of the portfolio will experience those pains in good years. However, one of the risks in consumer credit is that a bad year can be highly disruptive. Think about the Great Recession, not quite two decades ago. Top U.S. banks, arguably the world’s most experienced and best-run card businesses, faced billion-dollar losses with charge-offs north of 10%.

But there is a way out, and many credit card issuers have a strong solution to help people re-establish their credit: enter the Secured Credit Card

Secured Credit Cards Help Consumers Re-Establish Their Credit

Before the Card Act of 2008, predatory lenders dominated the market with complex money lending options that often took advantage of people trying to reestablish their credit to rent cars, stay in hotels, or have some transacting capability. Those horrific models were outlawed, and many mainstream lenders entered the market in 2009. Today, various programs exist. Javelin respects this niche and publishes a deep dive every three years. The latest report can be found here.

Chase does not offer a secured card, but they have a version with a unique product called the Chase Freedom Rise card. While it may not be much help for those in credit recovery, it does help those trying to obtain first-time credit. However, you will see secured card offers from Bank of America, Citi, Capital One, Discover, Synchrony, and U.S. Bank.

Looking Out for Exciting Innovations

The secured card market is projected to have 5.8 million cards by 2026, with an addressable market of 20 million consumers. While the credit quality may be low when these accounts are originated, most of the risk is mitigated by having cash as collateral squirreled in a bank account in the event of default.

There has been some exciting development in the space. In other PaymentsJournal articles, we’ve noted that Bank of America offers a small business secured card, and Amazon and Synchrony offer the first-ever private label secured card.

Loud and Proud

In 2019, we noticed that KeyBank had an exciting strategy in place, which it has continued to follow since then. KeyBank tracks and publishes numbers on consumers who started with secured cards and earned their way to full-featured, unsecured programs. KeyBank reported:

• Secured Credit Card customers are graduating this month after less than one year of using the tool, and two-thirds (65%) of those graduates are Millennials (those born between 1982 and 2000), as many in this generation struggle to find their financial footing and are turning to secured credit cards to establish good credit.
• “Millennials, many of whom came of age during the 2008 recession, are saddled with debt and looking for ways out of it. Our Secured Credit Card helps them overcome the barriers they face to establishing a strong credit history that makes financial achievements, like renting their apartment, a reality.”

In its latest announcement, Yahoo News reported that more than 30,900 KeyBank customers graduated from their secured card program, with more than 2,800 in the current “Spring 2024 Graduating Class.”

Sure, there may be more found at Bank of America, Citi, Capital One, Discover, Synchrony, and U.S. Bank. Still, KeyBank takes pride in helping their consumers, and it is an excellent way to acknowledge the program’s success.

The post Best Practices in Secured Credit Cards: KeyBank Still Nails It appeared first on PaymentsJournal.

The amount of credit card debt U.S. consumers have accrued is now $1.3 trillion and rising, but some states have more debt than others.

Consumers in Alaska have the highest credit card debt, according to data from WalletHub, with a median amount of $3,859 per person. Given the state’s average monthly credit card payment of $259, it would take over a year and a half for the average person in Alaska to pay off their bill. They would also incur $635 in interest along the way.

While a state’s median credit card debt can be an indicator of its residents’ financial health compared to other states, it’s not the only metric to consider.

“It’s also important to look at how much residents put toward paying their debts off each month,” noted Cassandra Happe, Analyst at WalletHub in a post. “Low average payments lead to long payoff timelines, which in turn lead to high amounts of interest accrued. For example, Vermont’s median credit card debt is relatively low, but it ranks as the state with the third-biggest debt problem due to low average monthly payments.”

Alarming Delinquency

Along with Alaska and Vermont, the District of Columbia, Connecticut, and Georgia rounded out the top five states by median credit card debt. One notable data point from the study is that even in the states with the least credit card debt, it would still take consumers more than 11 months to pay their debt in full if they just make the average payment.

“High median credit card debts in certain regions can be attributed to a combination of several key factors,” Happe said. “Firstly, areas with high living costs often see residents relying more on credit cards to cover everyday expenses, leading to increased debt. Despite having relatively high median incomes, residents in these regions may still face financial pressure due to the expensive cost of living, which encourages higher spending and, consequently, larger credit card balances.”

Lingering inflation and high interest rates have been responsible for an increase in credit card delinquency as consumers increasingly depend on credit cards to pay for everyday items. U.S. credit scores for lower-income cardholders have dropped to their lowest point since 2020.

“Moreover, the average monthly payments toward credit card debt in these areas tend to be low,” Happe said. “This slow repayment rate means that debt remains outstanding for longer periods, accumulating substantial interest over time. Additionally, individuals in these regions often hold multiple credit cards, which can lead to higher overall debt as spending is distributed across various accounts.”

Financial Insecurity

The tough macroeconomic environment can have a lasting impact on consumers’ mental health, according to a separate report by WalletHub. The study found that 64% of Americans feel insecure about their finances, and 41% believe their finances determine their self-worth.

“Financial literacy plays a crucial role,” Happe said. “Lower levels of financial literacy can result in poorer financial management, further exacerbating debt issues. Lastly, economic conditions, including job availability and wage levels, influence credit card debt. Economic disparities and high living costs drive increased reliance on credit cards, making it challenging for residents to manage and pay off their debts efficiently. These intertwined factors create an environment where managing credit card debt becomes a significant challenge for many individuals.”

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Macy’s sent a letter to its card users announcing an increase in the interest rate on its credit card to 34.49%, which appears to be a record high. Macy’s joins a group of other retailers now offering APRs over 30% on their store cards, including Petco, Good Sam, Michaels, and Exxon Mobil.

Store-only cards charge an average interest rate of 30.24%, according to figures compiled by Bankrate. By comparison, the average credit card interest rate is 21.19%, while the average retail credit card now charges an interest rate of 28.93%. That latter figure is also at an all-time high.

Two basic factors are causing rates to reach new heights. In addition to the Federal Reserve keeping interest rates high, retailers are seeking out sources of revenue to compensate for the Consumer Financial Protection Bureau’s push to lower late fees.  

The average credit card late fee is $32, but the CFPB has proposed capping it at $8. A federal judge struck down the ruling in May, but the decision is still winding its way through the courts, and many still expect it to take effect.

Seeking Revenue Sources

Store credit cards rely on late fees more than bank-issued cards, so the Macy’s fee represents an attempt to make up for that potential drop in late fee revenue. Some analysts estimate that Macy’s has derived nearly half its total profits from its credit cards in recent years.

“The lofty fees are not really surprising, especially given the retail category,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “With the CFPB legislation cutting late fee revenue, issuers are compensating. Also, the Fed continues to keep the rate steady, so we won’t see a decline in credit card interest rates until those decline.”

The Fed Funds rate is currently at 5.33%, the highest since early 2001, and the prime rate is at 8.5%. Despite the 35% rate that Macy’s is charging, Danner believes there’s still room for rates to grow higher.

“There are no federally regulated maximums on credit card interest rates,” he pointed out. “Rates will continue to increase until we see a lowering from the Fed.”

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Co-branded cards offer a more versatile alternative to the traditional private label store cards. Consumers can use their Amazon Chase Visa card to purchase goods from Amazon and buy groceries at their local store. Chase can adjust the rewards program to encourage everyday spending while maintaining loyalty among brand customers and offering the same options as a bank card.

In a new report, Co-Branded Credit Cards: 2024: Top Issuer Market Review, Benjamin Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research, examines why these cards have become so popular with consumers and issuers. He also looks at some of the concerns the industry is facing, such as increased scrutiny from the Consumer Financial Protection Bureau.

The Case for Co-Brands

An analysis of 12 large issuers’ portfolios reveals that co-brands make up 62% of consumer credit card products, attracting willing partners among issuers and merchants and drawing in consumers with reward programs. This data comes from Javelin Card Bench, an in-depth tool for credit card issuers.

Co-brands are experiencing significant growth. As store cards continue to decline slowly, several new co-branded cards have launched. In addition, with higher credit scores post-pandemic, more people now qualify for co-branded cards. Another factor driving growth is the surge in travel. Travel cards have created their own economy, with lucrative point reward systems leading consumers to free and discounted trips and travel perks like exclusive lounges.

Millennials are the top owners of co-branded credit cards, primarily using them for travel. Since travel cards are the most common co-branded credit cards, issuers continue to tailor their programs towards younger audiences.

Surveys show that millennials are less interested in owning things and more interested in experiences. As a result, they’re an active generation that wants to travel and explore, making them an excellent choice for co-branded travel cards. These consumers are expected to be the most frequent users of co-branded cards now and in the future.

“But the name of the game is still to try to capture everyday spend, because you’re not traveling all the time,” said Danner. “I can use the card for all my airline rewards, which encourages loyalty to a certain airline and building up rewards with them, but also it’s a card that I can use for dining out and for entertainment and groceries.”

How the Process Works

A merchant looking to partner on a co-branded card will issue an RFP, and issuers will respond with different proposals detailing the revenue-sharing agreements. Typically, the chosen partner will sign a contract lasting five to 10 years. The issuer assumes all the risk, managing both the underwriting and the rewards program.

“Sometimes, people make the mistake of thinking it’s the merchant that handles the rewards program,” said Danner. “They might have a little say, but the issuer is going to be that one that’s managing the program, as well as earning all that money off of interest and the annual fee. And of course once the issuer has all your information, there’s a cross-sell opportunity. If I sign up for the Amazon Chase Visa card, they will try to sell me into checking and savings accounts at Chase.

The merchant usually earns a bounty from the new card member signing bonus, as well as from revenue-sharing agreements and sometimes an interchange benefit. The idea is that if customers are spending at your store, you shouldn’t have to pay the processing fees.

CFPB Examinations

One concern for the co-brand industry is the interest that the CFPB has taken in the practice of issuers buying points from airlines. In 2020, during the height of the pandemic when travel was down, some of the major issuers bailed out some airlines by buying pre-purchasing large blocks of points. For example, American Express purchased 50,000 points from Delta to make them available to customers as promotional offerings.

Recent hearings indicate that the CFPB is closely examining airline rewards, particularly the point redemption scenarios that vary across the industry. They are investigating whether some issuers are buying these points at discounted rates and examining issues with redemption rates.

The concern is that frequent flyers could turn in their points only to find they’re not worth what they expected. Many consumers are confused by points rewards programs; one airline’s representative said that 85% of customers felt they never received any benefit from frequent flyer programs. Danner warned that this scrutiny could lead to legal changes significantly affecting several co-branded card products.

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Credit cards have become embedded in the payments landscape, making it critical for every financial institution, large and small, to be involved in a way that best suits their business. However, with much of the U.S. credit card market concentrated among a few key players, many smaller banks feel they can’t compete.

Credit Card Issuance by Small Issuers: Strategies, Risks, and Options, a report by Brian Riley, Director of Credit at Javelin Strategy & Research, examines the current market for small issuers and the ways they can contend with the credit card giants.

Top Issuer Advantages

There are 600 million active cards in the U.S. alone, meaning every household has around three cards on average. Yet, out of the 7,000 companies that issue credit cards in some form or another, 95% of cards are issued by the top 10 credit card companies.

Due to the centralization, smaller issuers might feel there’s no use fighting over the morsels the big companies leave by the wayside. They might also feel there’s no way they can compete against a bank like Chase, which has $180 billion in its portfolio.

Another advantage top issuers have is the ability to write off bad debt. Recent data from the Consumer Financial Protection Bureau indicates credit card issuers had a 14.3% average margin in 2023 and wrote off 10% of their receivables.

“It’s not feasible for smaller financial institutions to do the same, and still generate net income,” Riley said. “After servicing their operating expenses, marketing costs, technology investments, and occupancy, their costs will far exceed the remaining 4.3%.”

Protecting Main Street

While top issuers have advantages, there are ample reasons for smaller banks to have a credit card presence. Protecting their business from bigger financial institutions is chief among them.

Large banks like Citi and Wells Fargo have such an established credit card business that when they begin to expand beyond their footprint, credit offerings are where they start. And those products can be offered to any customer, regardless of where they are in the U.S.

“There are lots of hidden millionaires, which are people scattered throughout the country that have successful businesses of all shapes and sizes,” Riley said. “In many ways, those types of customer relationships are what community banks and credit unions thrive upon. Small bank owners have their feet on the street, their kids play softball with other business owners’ kids, and that’s how those relationships are built.”

One of the strategies bigger banks employ is to locate and attempt to attract the “hidden millionaire” customer base. Once the larger banks get their credit card offering up to speed, they will then move to offer deposits, college loans, mortgages, and other financial services.

“It might seem like a David and Goliath fight,” Riley said. “But small banks need to have a credit card business of some sort so they can protect their market.”

A Line of Defense

For small banks, risk is one of the major deterrents to establishing a credit card business. For that reason, those financial institutions need a line of defense that top issuers don’t require. Small banks often don’t want the debt on their balance sheet because they’re not big enough to handle it, but there are partners that can help.

“It’s similar to how mortgages are serviced,” Riley said. “Banks typically originate mortgages and then sell them to Fannie Mae or another entity, which takes them off the bank’s books. The bank gets the money back and they can reinvest it in another mortgage. There’s a sourcing channel and a servicing channel.”

Partnering with agent banks can deliver benefits like increased liquidity and efficiency. Partners can also reduce regulatory burdens and help financial institutions present compelling credit card options.

There are often hybrid programs for those banks that are willing to take on more aspects of the credit card business. It allows those institutions to become more of an equal partner with agent banks, instead of just a referral source.

There’s a trade-off, however, because banks and credit unions won’t make as much money as they would if they were the sole issuer. Even though they may lose product control, financial institutions will reduce their risks dramatically.

Turnkey Infrastructure

When Citi and Chase and their fellow big banks pioneered the credit card model decades ago, they had to build the whole infrastructure from the ground up. With the help of agent banks, small financial institutions don’t have to reinvent the wheel.

“Every bank should have a play on credit cards,” Riley said. “Just like if you don’t have a debit card, you really don’t have a consumer bank anymore. If small banks have the right money on deposit, they can reach out to a partner and it’s a turnkey solution. It’s remarkable how quickly they can turn a credit card business on, and then banks can operate through their whole ecosystem.”

The post Not Just for Giants: How Small Banks Can Compete on Credit Cards appeared first on PaymentsJournal.

Recognizing the popularity of both travel rewards cards and digital wallets, Visa introduced its Digital Emergency Card Replacement, a new service that delivers a digital card replacement to travelers who have lost their physical credit or debit card.

Digital wallets have become an essential part of the travel experience for many, with 74% of U.S. travelers now using them on their trips,^, according to 2023 data from Visa. Separate data from WalletHub noted that half of Americans plan to use credit card rewards points to pay for a vacation this year. The new Visa offering leverages these two trends to align with how people travel today.

The service highlights the increasingly blurry distinction between physical cards and their digital counterparts. The traditional method of replacing a card—sending it via U.S. mail—doesn’t work when the cardholder is traveling. Through the Visa service, travelers who lose a card can receive a digital replacement via text or email within minutes. The cardholder then authenticates and adds the new card into their digital wallet, gaining the ability to use the card right away.

A Boon to Issuers

While Visa is touting this as a tremendous convenience for travelers, there are important benefits for card issuers as well. This service ensures that cardholders maintain their purchasing power even when their physical card is lost.

“This is a great service that leverages the power of digital wallets to create peace of mind for travelers,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “For the consumer, losing a card on vacation could be a disaster, and having the ability to have it back in digital version is a great value-add. For the issuers, this is a way to capture spend that otherwise would be lost to other payment methods during the gap of time between replacement.” 

These travel expenses are especially valuable to card issuers, especially as Americans continue to spend more on travel in the post-COVID environment. According to a Bankrate survey, 42% of respondents earning at least $100,000 plan to spend more on travel this year. Additionally, 27% of respondents indicated they would be willing take on debt to fund their travel plans.

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The relationship that made Capital One the exclusive issuer of Walmart credit cards officially ended last Friday. The partnership began 2018, with Capital One becoming the exclusive issuer in 2019.

The breakup seemed inevitable ever since Walmart filed a suit against Capital One in April 2023. The retail giant alleged various breaches of the partnership contract, including delays in posting transactions to cardholders’ accounts and failures to promptly replace lost cards. This March, a judge ruled that Capital One had not provided the requisite level of customer service it had agreed to, giving Walmart the right to end the partnership.

According to a statement Capital One issued earlier this month, the bank “ended the agreement that made Capital One the exclusive issuer of Walmart Consumer Credit Cards.”  The key word is “exclusive issuer,” so the announcement does not necessarily mean that Capital One will no longer issue co-branded cards with Walmart. The statement also indicates that Capital One will retain ownership and servicing, with a further announcement expected in several months.

“It will be interesting to see Walmart’s next steps,” said Brian Riley, Director of Credit & Co-Head of Payments at Javelin Strategy & Research. “They have been experimenting with their fintech, One, and are also doing buy now, pay later. Partnering has proven to be challenging, not just with Capital One, but also their prior partner, Synchrony.”

Walmart’s two-decade relationship with Synchrony Financial also ended in a hailstorm of lawsuits. Walmart sued Synchrony for $800 million in 2019, claiming the company was refusing to underwrite weak credit card accounts. The suit was later dropped, but the relationship was severed. Synchrony did manage to keep its status as the issuer for the Walmart subsidiary Sam’s Club.

Walmart’s Future Options

Where does Walmart go now? There are a few alternatives.

Walmart may begin a relationship with another issuer, though some issuers may hesitate to build a co-branded partnership after the retailer’s second terminated relationship. However,  with approximately 255 million customers and members visiting Walmart stores each week, the relationship will be appealing to many issuers.

Walmart may also turn to its majority-owned fintech, One. If this change occurs, the company must decide which firm would bear the risk on their balance sheet.

“Decades ago, retailers often supported their credit card receivables, but when the economy went into a downturn, balance sheet stress usually required the firm to sell the receivables,” Riley said. “However, the retailer’s recent movement to BNPL may indicate that they are willing to add some balance sheet risk.”

A third option would be for Walmart and Capital One to repair their relationship, though this is unlikely, given the litigation.

The post Walmart Weighs Its Options After Moving On from Capital One appeared first on PaymentsJournal.

Banks tightened their lending standards and terms on credit cards in the latest quarter, more than for similar products like consumer loans and auto loans. Cardholders faced higher required minimum credit scores and experienced more difficulty getting loans approved if they didn’t already have qualifying credit scores.

The Federal Reserve’s Senior Loan Officer Opinion Survey (SLOOS), issued quarterly, reported that a significant share of banks had increased their minimum credit score requirements for credit card loans. Only a moderate number reported doing the same for other consumer loans. Terms and conditions were generally left unchanged on those loans, except that credit card limits also showed a tendency to be tightened. 

Lenders also reported increasing interest rate spreads for all consumer loan categories. The current average credit card interest rate reached a record high of 20.75% in April, although it has slipped a bit to 20.66% in May, according to data from Bankrate.

Standards Continue to Rise

The Fed survey found that about 21% of banks overall, and 32% of large banks, said that in the past three months, their standards for approving credit card applications have “tightened somewhat.” This number peaked at 36% in the SLOOS report from July 2023, but has been falling ever since. The lowest that number has been in recent years was in July 2021, coming out of the pandemic, when 37% of banks reported their standards had loosened.

These standards have been tightening despite weaker demand for credit card loans and other consumer loans.  As of Q2 2022, 26% of banks said that credit card demand had increased, but this figure has been dropping ever since. 

Additionally, 22% of banks, and 23% of large banks, reduced their credit limits for credit cards in the past three months.

The survey also found that banks are raising the minimum credit scores required to get a credit card. Of those surveyed, 24% of banks, and 32% of large banks, reported stricter minimum credit score requirements.

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Just days before it was slated to go into effect, a federal judge in Fort Worth, Texas, blocked the Biden administration’s rule limiting credit card late fees to $8. Although the rule was supposed to go into effect on May 14, the preliminary injunction has placed it on hold, likely until a Supreme Court ruling is reached.

U.S. District Judge Mark T. Pittman granted the preliminary injunction to a cadre of organizations, led by the U.S. Chamber of Commerce. The Chamber sued the Consumer Financial Protection Bureau after the late-fee rule was finalized in March.

This is far from the end of this fight. The decision wasn’t based on the specifics of the late fee rule but rather on a 2022 decision by the U.S. Court of Appeals for the Fifth Circuit that found that funding for the CFPB is unconstitutional. The case is awaiting a Supreme Court ruling, which is expected by the end of June.

Because of the pending case, Pittman did not specifically address the plaintiffs’ arguments, although he called them “compelling.” Legal experts have said that if the Supreme Court decides the CFPB’s funding is legitimate, the CFPB will likely seek to lift the preliminary injunction. Congress transferred authority for CARD Act rules, which set the current limits for late fees back in 2010, from the Federal Reserve to the CFPB.

The Texas court has become a popular venue for conservatives seeking a sympathetic ear.  Despite Pittman’s attempt to transfer the case, citing the absence of banks affected by the rule in the Northern District of Texas, the U.S. Court of Appeals for the Fifth Circuit overturned that decision.

The Lay of the Land

For card issuers, the decision means that the CARD Act’s existing late fee rules will remain in place for now. This entails ensuring that any late fee is “reasonable and proportionate.” Under the current regulations, there’s a safe harbor provision, setting penalty fees at $30 initially, and increasing to $41 for subsequent violations within six cycles. 

The new rule would have reduced that safe harbor late fee to $8 for large card Issuers, defined as those with one million or more open consumer credit card accounts. There would be no higher amount permitted for subsequent violations, and the $8 limit will not be adjusted for inflation, as had been the case with the existing limit.

[Editor’s Note: This article has been updated to reflect an update to the ruling]

On May 16, the Supreme Court ruled that the Consumer Financial Protection Board’s funding mechanism is constitutional, clearing the way for several items of interest to the payments industry to move forward. Among the CFPB’s pending agenda items:

Late Fees: A court in Texas had delayed a suit that would have prevented the CFPB from implementing its $8 maximum credit card late fee. It now looks as if there is no basis for that suit to continue, and the late fee is likely to take effect.

Digital Wallets: The CFPB has also been working to finalize a rule subjecting the largest digital payments providers and digital wallet operators to direct supervision by agency examiners. This also looks as if it will move forward, likely later this fall.

UDAAP: The American Banking Association and the U.S. Chamber of Commerce sued the CFPB after announcing that it had updated its exam manual by expanding the definition of unfair, deceptive, or abusive acts and practices (UDAAP) under the Dodd-Frank Act. This decision is currently under appeal and the suit may disappear altogether.

Open Banking: The CFPB’s proposed new rule that would enable customers to freely share their financial information with third-party financial service providers seems ready to move ahead as well.

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