Credit Card Industry Overview

What follows is a US credit card industry overview collected from consumer groups and credit card sites.
In 2006, credit card companies in the United States collected around 115 billion dollars in revenue. Around two-thirds of this came from interest payment collections, one-fifth are taken from fees paid by merchants who accept credit cards, and around 15% came from consumer fees. According to a credit card industry overview organization, this year gave the industry profits of about 18 billion dollars.

The following year saw more profits for banks specializing in credit cards that those who deal with general banking. Studies from the FDIC say that the return on equity for credit card banks was 15.1% while that of the rest was a meager 8.2%.

Two years after, however, the US credit card industry overview showed the difficulties faced by credit card companies which was reflected in the billing statement of all consumers. Half of credit card holders noticed changes in their bills which included lower credit limits, higher interest rates, and more fees to pay. In the defense of credit card companies, they were in the middle of a very difficult financial crisis. The first hit came from the economic plunge of 2008. A lot of businesses and banks went bankrupt leading to layoffs and a significant increase in unemployment. While in the process of recovery, the CARD Act of 2009 was signed. This pro-consumer law further worsened the predicament of credit card issuers, finally prompting them to take drastic measures in order to stay in business.

According to credit card industry overview sites, there are two steps to their plan: raise more revenue and reduce lending risks. To raise more revenue, credit card companies increased interest rates, some to a whopping 29.99%. They also added annual fees, switched almost all fixed rate credit cards to a variable rate, increased the amount of transaction fees and imposed new ones. A lot of rewards programs were also “simplified” to reduce costs. To minimize lending risks, credit card companies cut credit limits, closed existing credit card accounts, and restricted standards for lending and credit card approval.

All credit card industry overview sites recorded these major changes in the credit card industry. According to them, card issuers already made adjustments to their business models in anticipation of the CARD Act of 2009. Most credit card industry overview sites still expect these changes to continue in 2010, albeit at a slower pace.


Source: Credit Cards For People With Bad Credit Rating

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