This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Citigroup Gets Creative to Boost Cards

Given the changes in the industry, card issuers need to focus on opportunities to increase revenue they generate from interchange fees, meaning that they need to drive more transaction volume, says Ron Shevlin, senior analyst at Aite Group.

"Citi's imposing spending minimums, not only do they try to drive the transaction volume but there is a mix of carrots and sticks. The stick being, 'Hey you're going to get hit with a higher interest rate unless you spend the money," Shevlin says.

Even though the move is risky, given that some cardholders could decide to close their accounts, "it's a smart business move," he says. "They have to do this to drive the volume."

The topic of interchange fees -- the fees paid by a merchant's bank to a customer's bank after they make a purchase on an accepted card network -- is a dicey subject for card issuers and payment networks like Visa (V - Get Report), MasterCard (MA - Get Report), American Express (AXP - Get Report) and Discover (DFS - Get Report).

Since payment networks set the pricing of interchange fees for their bank customers, there has been much controversy surrounding alleged interchange abuses, including a host of lawsuits against the firms alleging overcharges.

Dennis Moroney, research director in bank cards at TowerGroup, says that card issuers should still be able to make money on customers by implementing more fees, such as annual fees, pay for privileges, even possibly charging customers if they don't use a card enough.

Bank of America is tacking on annual fees to some of its credit card customers in an effort to what works and what doesn't, for both it and its cardholders.

JPMorgan Chase, which is among those issuers to lift interest rates and lower credit lines, has also created card products and services that are tailored to specific customer segments. The company says that it doesn't matter whether a customer uses a JPMorgan Chase debit or credit card, as long as it uses one or the other.

--Written by Laurie Kulikowski in New York.

3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AXP $77.32 0.00%
C $53.07 0.00%
BAC $15.56 0.00%
DFS $59.08 0.00%
JPM $62.84 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs