American Banker, a daily paper that is geared toward banking and financial-services executives, has an interesting story out this morning. In particular, American Banker looks at JPMorgan Chase's decision to kill WaMu's secured-card offering, which was first reported by CreditMattersBlog.com last week (link here). The takeaway from the American Banker story is this: Chase's decision to eliminate the card comes at a time when demand for such offerings is on the upswing.
From the story: Bankers and observers said they were surprised by the decision.
"This would seem to be the exact wrong time to be getting rid of secured cards," said Jennifer Tescher, the director of the Center for Financial Services Innovation, a nonprofit affiliate of ShoreBank Corp. "I think they're going to become an incredibly important tool given the regulatory changes around credit cards that we've just seen from the Fed, and the state of the economy, and the state of the average consumer's credit score."
Indeed, the decision is surprising. Maria Aspan, the American Banker reporter who wrote the story, asked Chase if it had any plans to reintroduce the product in the future. Chase wouldn't say. My source, however, tells me that Chase is not bringing it back.
You can read the entire story here (link). By the way, thanks to American Banker for providing a preview (free) link for my CreditMattersBlog.com readers. The majority of American Banker's site is subscription based. This story would not normally be available to non subscribers.
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Monday, January 12, 2009
JPMorgan Chase To Drop Secured Card Despite Favorable Trends
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9 comments:
I'd like to know the reasoning behind this. To me secured is secured, period. The risk is pretty much non existent other then minimal account maintenance cost chase will incurs just with any other account.
Also, using common sense and I could be wrong, but people who spend the time and money to create a secured card are surly going to make a much bigger effort to pay their CC bill on time, in other words they are more responsible consumers. And in a time like this the banks need responsible consumers regardless if the banks lend them $500 or 50k.
So this decision just behooves me.
Hk, read my previous story on the topic. It seemed to be the "headache" factor that did this in.
http://www.creditmattersblog.com/2009/01/wamu-secured-card-first-casualty-in.html
Thats the impression I got. Chases system does not have a mechanism for maintaining a secured product. Seems like an easy fix to me... For (mostly) free money
And the thing is, Chase used to have a secured product. Not sure how difficult it would have been to resurrect it.
But then, why did Chase kill its previous secured offering? Chase did not comment on the profitability of the WaMu secured-card portfolio. Makes me wonder just how profitable it is (maybe not very much). If it was, Chase would make the transition happen.
I have doubts about reviving a legacy product.
Chase has a rather complex history (not unlike most other major banks with a national presence).
JPMorgan Chase = Chase National Bank + Bank of Manhattan + Chemical Bank / Manufacturers Hanover + Bank One + Washington Mutual + others investment banks = fustercluck (especially since each former constituent banks were a conglomeration of other banks too)
I'd imagine integration with other banks was a pain enough, much less trying to revive a product once offered on a legacy banking platform.
I think the easiest thing would have been to restore its previous secured platform. I doubt that Chase killed the architecture.
I'm thinking it was even more than the headache factor. It might have had to do with profitability. Maybe.
When there's enough money on the line, headaches aren't a problem ;-)
BW, exactly. Probably just wasn't worth it. Plus, Chase used to have its own secured product, which it killed. Must not have been profitable (or not profitable enough) for Chase to continue with its own program. It's not surprising that it would close and discontinue the WaMu secured-cards program.
For 15 years I have had a providian account and I just found out today that it was closed by j p morgan who bought WAMU who bought Providian. They claimed it was secured but it was not and for a number of years I put small amounts of money into a savings account for Providian which they discontinued. My balance is about $5000 never missed a pmt or late and always paid over for 15 yeas and the savings is about $1000 but they claim because of the savings it was secured even though it never was. They are going to apply the saving to the balance and I guess I am supposed to pay them right away? Seems like fraud to me and we are looking for a class action attorney. Providian has been nailed in the past for these deceptive practices.
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