Magazine article American Banker

Casino Specialist's Interchange Rx: Private-Label Card

Magazine article American Banker

Casino Specialist's Interchange Rx: Private-Label Card

Article excerpt

Another company is attempting to circumvent credit card interchange -- this time, in the gambling industry.

Global Cash Access plans to begin marketing a private-label credit card this month that will let casino patrons draw their entire credit lines (which would generally go up to $20,000) as cash advances from its machines.

Thomas Sears, a vice president at Global Cash who will oversee the card program, said his Las Vegas company spent $90 million on interchange last year -- its second-highest expense after the commissions it pays casinos.

"We expect to make money from the credit card program," he said last week, but "with the net savings from the interchange cost, we'll be happy."

Global Cash Access provides ATM and other credit and debit card services at casinos. It said last December that it was considering a lawsuit against Visa U.S.A. for increasing interchange rates on Global's PIN debit service, which lets patrons withdraw money from their bank accounts after they have reached daily ATM limits. No suit has been filed.

Harry Hagerty, Global's chief financial officer, said during a conference call last week that though its commissions are "dictated by competitive forces among buyers and sellers, interchange is dictated to us by card issuers.

"So if we issue credit cards, the interchange goes to us and essentially becomes eliminated as a cost," he said.

Mr. Hagerty said general-purpose credit cards are unaccommodating for cash advance transactions, because cardholders cannot use their full line of credit for cash advances. They pay fees for such advances and are not afforded grace periods for repaying them.

"Our day-to-day interactions with literally hundreds of thousands of gaming patrons tells us that a good number of these people have more credit available on their card that they just can't access because of artificially low ceilings imposed by traditional issuers," he said. …

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