Tag Archives: American Express

Direct banks continue to grow deposits

Direct banks continue to outpace bricks-and-mortar banks in terms of deposit growth.  These direct banks continue to aggressively promote high rates, and are also benefiting from consumers’ increased comfort with online banking.

—USAA grew deposits 16% in 2009 to $33.5 billion

—Ally Bank (a unit of GMAC) grew deposits 55% y/y to $30.0 billion at the end of 2009, based on offering high rates on deposits, strong customer services, clear terms and conditions, and a significant investment in advertising.

—American Express launched its Personal Savings from American Express program in the second quarter of 2009, and this contributed to its U.S. retail deposits rising 70% y/y to $26.3 billion at the end of 2009.

–Like American Express, Discover has been on the hunt for deposits in order to create more diverse funding sources for credit card and other lending. Its deposits rose 114% to $14.8 billion at the end of 2009.

–Bucking the high-growth trend were ING Direct, which grew U.S. deposits by only 5% in 2009, having grown at very strong rates in recent years.  In addition, E*Trade Bank reported a decline in deposits in 2009, as it sought to reduce its balance sheet.

Going forward, the rate of growth in deposits for direct banks should moderate (with many of these banks having attained a critical mass of deposits that they can deploy to fund lending).  The focus for many direct banks will shift from aggressive deposit acquisition to customer retention as well as cross-sell of additional products and services.

Growing proliferation of credit card annual fees

Bank of America reported in mid-October that it plans to impose annual fees on some of its credit cards.  In the short term , this will probably create some bad press for the bank.  However, all of the leading card issuers are overhauling their pricing models to address new card legislation as well as huge increases in charge offs and provisions for credit losses.  So, we should expect greater proliferation of annual fees, as well as lower incidence of introductory offers and higher APRs.  Some examples below of cards from leading issuers that feature annual fees (this list does not include secured cards, many of which come with annual fees):

  • Capital One No Hassle Cash Rewards: $39 annual fee
  • Fifth Third Platinum Prime MasterCard: $89 annual fee (although note that the APR on this card is Prime + 0%
  • PNC points Visa Signature: $75 annual fee (waived with $20,000 in annual spending on the card)
  • U.S. Bank FlexPerks Travel Rewards Visa: $49 annual fee (waived first year, and waived any year when at least $24,000 is charged to the card)
  • Escape by Discover: $60 annual fee

And of course, American Express has increased marketing of its charge cards, all of which have annual fees.

Ironically, Wells Fargo appears to have dropped the $19 annual fee that came with its credit card rewards program.  Rather than market an optional rewards program to cardholders, it simply promotes rewards and non-rewards credit cards.  Wells Fargo still imposes an annual fee (of $12) for an optional rewards program with its check card, and does allow customers to pool rewards earned on check and credit card spending.