BAC PL

Random Thoughts: American Express, Kraft, MGM

Even when the Blue card had the chip, virtually every in-person transaction (versus those conducted by phone or over the internet) still used the magnetic strip on the card.

The issue on chips for Amex - as well as Visa, MasterCard, and Discover - is that the terminals at point of purchase aren't set up to accept them. It's a little bit of a chicken & egg problem: Unless and until we have widespread adoption of chip reading technology on the merchant side, why should the payment networks embed chips? But if cards don't have chips, why should merchants upgrade their terminals to accept them?

Finally, ExpressPay is an RFID technology. Select Visa (payWave) and MasterCard (PayPass) cards also have this. It's being used for small ticket purchases at QSRs and drugstores. Not sure how the security compares to chips.

AmEx's Pain Likely Discover's Gain

Frank -- We get that you love DFS. When did you get in (hopefully not last year!), and what's your prediction for 6 and 12 months for DFS?

How Much Credit Is Too Much? Where AmEx Went Wrong

@ mdmrjsds:

Good points. The only thing I'd add is that, beyond the need to grow the business by expanding the target, there's another strong rationale: merchant acceptance. Expanding Amex's footprint gives the company a stronger argument (network effect) when it is negotiating with retailers to take the card.

How Much Credit Is Too Much? Where AmEx Went Wrong

@ mojo:

1. The fact that Citi is a large card issuer is a far cry from saying that cards are its core business. Listen to one conference call, and you'll know what I mean. The amount of time that management, and the analysts, spend discussing cards is dwarfed by the focus on the banking operation. Back to my point: The author would do better to compare pure-plays (MBNA (pre BAC), Cap One, Advanta, DFS even), than Citi. Whether or not C is a large US player (forget about the rest of the world), the type of comparison he's making calls for like to like. What % of C employees do you think are actively focused on the card business? 5% maybe?

2. You're mistaken again. This is simple logic, man. Look at the charts and think: If you have a young, low income, thin credit file type of card applicant, do you grant him/her a large line? Of course not. And what if you have a high FICO, 6 figure applicant -- doesn't he/she merit a higher line? Sure thing! That, very generally speaking, is why Discover has lower lines. Seriously, Discover could (and should!) be very tight with lines if it's granting credit to low income/thin credit file consumers. In a sense, I'm almost agreeing with you and the author, actually. For any given cardmember, the limit should be "right," however you define that to be. But best underwriter? What does that even mean? If you give miniscule lines, no one defaults, or the default loss is minimized. But being "hardest to get" does not make DFS the best underwriter.

By the way, you make me laugh. It seems like you're implying that's there's something desirable about the hard-to-get Discover card. So ... the ultra-rich are tossing their Amex Black cards for Discover cash back? LOL. Even among us normal folk, who wants to pull out a Discover card at a nice restaurant? Might as well pay with food stamps.

How Much Credit Is Too Much? Where AmEx Went Wrong

SeekingAlpha sucks again. How do these things get on Yahoo Finance?

1. Without checking your numbers, I'll grant that the MBNA > McDonald's comment is okay, as MBNA was a pure-play issuer. But comparing Citi to Wal-Mart and Microsoft is dumb. Citi's card issuing business is a tiny part of its whole operation.

2. It's Jamie Dimon, not Dimond. What's next? Warren Buffet?

3. You're missing some important decimal points in your charge-off table.

4. Your big point, that AXP has handed out larger credit limits to its card holders is conjecture not based on fact. It's possible, given the scenario, but you've provided no proof.

5. Discover's credit limits are low because they are targeting the low FICO, high risk sorts of people.

6. How can anyone trust advice from someone who is long DFS? LOL