Home > Credit Cards > BofA Gets Out of International Credit Card Business: Why?

Comments 0 Comments

This week, Bank of America announced it would be dropping its international credit card operations to focus on its core business: American credit cards. The bank’s strategy is clear, says CEO Brian Moynihan. “We have been transforming the company to deliver the franchise to our core customer groups, and building a fortress balance sheet behind that,” he’s quoted in the bank’s official statement.

The Charlotte, N.C.-based company has sold its Canadian credit card business to TD Bank Group for $8.6 billion and plans to “exit” credit card businesses in the U.K. and Ireland—operations that employ 4,000 people and have extended $19 billion worth of credit, according to its press release. Earlier this month, Apollo Capital Management, Inc. signed an agreement to buy BofA’s credit card accounts in Spain; the company’s $200 million portfolio of small business card loans in the U.K. were sold to Barclays in April 2011.

BofA will also sell off its international credit cards, which aren’t even branded with BofA’s name.

Cheryl Garrett, a financial expert and founder of Garrett Planning Network, a financial planning company based in Kansas, says there are a few factors that could have driven BofA’s decision.

[Related article: B of A’s Big Bill for Bad Loans Finally Comes Due]

On the one hand, the international operations are simply worth quite a bit of money. That’s particularly important now, in the wake of the bank’s $8.8 billion loss in the second quarter and in light of its challenges to come. The company faces major legal costs to defend itself against lawsuits brought by homeowners, investors and government regulators over its sale and bundling of high-risk mortgages during the housing boom. Meanwhile, new laws including the Dodd-Frank financial reform act require important banks like BofA to keep more hard reserves on hand and reduce how much they leverage their capital in the form of lending. “I think they’re absolutely needing to get cash,” Garrett says.

[Resource: Tips to Improve and Rebuild Your Credit]

On the other hand, the recent upheaval on the streets of London and continued concerns about the state of the European economy suggest that now may be the best time to exit the market, Garrett says. “It’s one of two things,” says Garrett. “It’s either an asset that’s worth something that they can sell to shore up their balance sheet, or this asset is potentially very risky and would add to the current risks of loan losses. Or it could be both.”

As Bank of America sells off parts of its sprawling empire, the effect on the megabank’s balance sheet will be huge, but the effect on American consumers should be minimal, according to a number of credit card analysts.

“I don’t see any immediate impact for consumers,” says Beverly Harzog, Credit.com’s credit card expert.

[Featured Product: Looking for credit cards for good credit?]

Image: The Consumerist, via Flickr.com

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team