Credit Card Insider

Credit Card Industry Critic Highly Opinionated, Clueless

I almost forgot my favorite part! You use the word "clueless." You quote Capital One interchange income as $146 million. It's in their 10K so it must be true. Let's think about that. Visa published interchange rates of 1.51% for Tier III retailers is a pretty good average to use would mean that Capital One cardmembers only purchased $10 billion last quarter. Actually, according to Nilson Report Capital One's volume last quarter was closer to $30 billion. So interchange gross income for that one quarter was closer to $450 million--but they only reported $150. Where did the missing $300 million go? Maybe rewards? Cap One reported total rewards expense of $180 million in 2007--divide it by 4 and suddenly we've found $45 million of that missing $300 million, but where's the the next $255? Rewards Liability? In all of 2007 rewards liability went up from $1.1B to $1.3B a difference of $200 million. Now divide that by 4 for last quarter and we found another $50 million. Now only $205 million is missing from last quarter. Where did it go? Contra-loss account to shore up losses? No! They wouldn't do that! It must be hidden somewhere. Seriously, you wall street guys need to start doing the math behind the numbers and stop taking the 10Ks as religion. The credit card house of cards is preparing to fall. Don't drive investors off the cliff again.