The Past and The Future

The Past

Not all that useful, but definitely interesting is this little retrospective from Slate on the history of the credit card.   My favorite is number 10, the University of Delaware Mastercard.   UD happens to be my Alma Matter, and it seemed like a significant percentage of my classmates worked at nearby MBNA doing telemarketing.   MBNA was purchased by Bank of America in 2005.   Finally, you may know that Vice President Joe Biden is a UD grad, but did you know that both Obama’s and McCain’s top campaign strategists attended UD?

The Future

Remember way back before the Credit Card Bill of Rights passed , when banks were pushing the line that they would no longer be interested in “dead beats” who pay their bills on time.   Now read this article from Advertising Age. It only took a week or two for undesirable deadbeat to become desirable again.   Banks are waking up to the fact that merchant fees are a huge cash cow, especially with low risk “deadbeats” like myself who pay their bills on time and avoid interest and fees.   Not only are these banks competing against themselves, but they are also competing against debit cards, cash, and checks as a method of payment rather than a method of finance.

I think that there may be a future in annual fees, but only if the card provides a major benefit to the customer.    I would at the following examples to see where the trend is going.

Delta Reserve American Express

This card has a huge $450 annual fee.   On the other hand, you get massive benefits that more than justify the fee.   The biggest two are the domestic first class companion upgrade, and the Sky Club lounge membership.    Other perks include priority standby privileges over non-card holders, and lots of uber-valuable elite qualifying miles.   Note that these benefits really entail little if any marginal cost to Delta or American Express, yet are very valuable to their card holders.

Chase Continental MasterCards

Holders of these cards will still be allowed two checked bags for free.   Again, this really isn’t much additional marginal cost for Continental, yet it is a valuable perk for the customer.  Their “Presidential” card has a $375 fee, but includes a business class two for one ticket, and elite membership with Hyatt hotels and Avis car rentals.

What Is The Trend?

It seems that companies will be looking to entice desirable customers with higher annual fees, but that fee will come with membership perks that justify it.    Some frequent fliers jeolously complain that people are ing the status that they are “working” hard for with all of their travel.

When it gets right down to it, the “deadbeats” are the most reliable bet for banks in a crisis like we are facing now.   Having to many customers who always pay their bills on time seems to be a problem most banks would like to have.

Where Is The Credit Crisis Worse?

I have seen the claim of a city being the “foreclosure capital” so many times, I am completely disillusioned.   Depending on which news report you read, the foreclosure capital is Stockton, California, Colorado, Jacksonville, Florida, or Las Vegas, Nevada.   In fact, the way the media covers it, it almost seems like some cities take pride in the title.

When it comes to credit card debt, there are several contenders. If  you look through the top twenty, half seems to be hard hit cities in the Midwest like Cleveland and Indianapolis, while the other half seems to be warm weather places, largely in Florida, that have been part of the real estate bubble.   Either way, regional financial difficulties seem to translate directly into credit card debt/