DFS
#Hi, <UNK>.
It's <UNK>.
Most of our loan fee income is driven by late fees, and they typically have a seasonal increase in the third quarter, so that's not anything in terms of new annual fee products or anything like that but more just the trend seasonality and late fees.
Sure, <UNK>.
The biggest factor behind our higher rewards rate is the higher ---+ is our double promotion for new accounts and that we're pleased with the economics and the lower cost per account and the greater number of new accounts that's driving.
And so we've continued to aggressively offer that, and it's driving the rewards rate a little bit faster than we had even anticipated a few quarters ago.
And your second part of your question was around how we think about it as marketing, and we really think about promotional rates in conjunction with what it does to cost per account and that's true with promotional APRs as well.
And we are constantly testing and evaluating what gives us the lowest all-in costs and the best long-term profitability from the combination of marketing spend, promotional rewards, and promotional APRs.
And I'd just underscore the overall objective of that program is to drive engagement in the target marketplace, so I think it's really important to point out that we don't have any desire to be a me-too in the very high-end rewards space.
Yes, I would say there are certain offers out there that we scratch our heads about how they could possibly make anyone's potential hurdle rate, and I think one of the indicators is you go online and look at the gaming sites and there are certain card offers right now that people are saying go get this card, they've gone viral, and in my ---+ I'm not sure it's necessarily even the target market that may be responding to some of these offers.
And we've seen some of this in the past and we are somewhat late cycle.
People are seeing credit cards as a much more profitable product than most anything else in banking, so they are diverting resources but frankly, some of these offers I think will in the long run have to be significantly devalued because how they're used and what the interest rate is and how many people leave after the promotional time period will all drive the economics, and I would suspect that some are not sustainable.
So it definitely does have an impact on the NIM.
It's not the largest of the component pieces that's impacting NIM.
I would say in terms of transactor attrition, it's a modest amount of it.
It has been relatively consistent in terms of that contribution.
Don't really want to forecast looking forward what's going to happen with transactor volume and transactor accounts.
Candidly, we don't want to attrite those transactors forever.
So I think there will be some element of that but really, the big drivers on the NIM expansion continues to be the card yield itself as well as that higher revolve rate, which is a component piece that you noted that really is effected by that transactor mix.
But I would also say its been very effective management on the part of the Treasury team and deposits business on our funding costs, which has been really a huge contributor to that 37 basis point year-over-year increase in NIM that you see reported.
I would say if you think about it, we just contributed some new accounts to our securitization trust here a couple months back, so you now have vintage data for some of those newer originations that are there, and I would say the 2015 year for us thus far looks pretty solid.
The one thing I would caution you on in looking at those vintage curves though that I pointed out there is in adding new accounts to the trust, you don't add any charged-off accounts.
So the numbers you're going to see there for those new accounts are going to be somewhat elevated because until we actually start taking charge-offs on those ---+ or getting recoveries on those rather, you're really looking at gross charge off numbers.
The recoveries that weren't added.
Right.
<UNK>, did you have a follow-up question.
So we have not seen any impact from that yet.
I think the folks who really commented on it have traditionally sold a chunk of their portfolios.
We have not in the last 10 years sold any of our portfolios, so I'd say we continue to evaluate the proposal.
It's really kind of too early for us to fully understand its implications, but it's not factored into our reserve estimates nor do we currently think it's a big issue for us.
You bet.
Thank you, Chantel.
The investor relations team will be around this evening if anyone has any follow-up questions.
I hope everyone has a good night.
Thanks.
