Category Archives: Credit card

Volumes for Leading Card Issuers Are Recovering

In their most recent quarterly financials, the leading U.S. credit card issuers continued to show improvement in spending volumes. Credit card volumes were significantly hit in 2009, as consumers pulled back on discretionary spending, and as credit card issuers retrenched and reduced account numbers.

The following chart shows that most leading issuers returned to year-on-year growth in credit card volume in 2010, and that the rate of growth has steadily improved.

The reasons for the recent improvement in card volume are:

  • Overall economic recovery, with corresponding growth in consumer spending
  • Issuers’ promotion of card spending as a source of revenue, in particular as outstandings growth has been largely absent

A number of card issuers recently predicted that card outstandings should grow in the second half of 2011, but we expect that issuers will continue to push card volume, and aim for a good balance between spending and lending.

Bank card issuers continue to improve credit quality metrics

4Q10 financial results for the leading bank card issuers showed that they are continuing to improve charge-off and delinquency rates. In fact, these rates are now beginning to return to normalized levels, which should mean that issuers will now turn attention to driving revenue growth, which has declined significantly over the past two years.

The following are 4Q10 charge-off rates for the leading U.S. bank card issuers (as reported in company financials):

Issuer 4Q10 Charge-Off Rate Y/Y Change Q/Q Change
SunTrust 5.65% -286 bps -116 bps
U.S. Bank 6.65% -24 bps -46 bps
PNC 7.05% -198 bps +64 bps
Chase (legacy Chase) 7.08% -156 bps -98 bps
Fifth Third 7.12% -169 bps -56 bps
Capital One 7.28% -231 bps -95 bps
Wells Fargo 8.21% -240 bps -85 bps
Bank of America 8.24% -364 bps -88 bps
Citi (Citi-Branded Cards-North America)

8.80%

 – 50 bps -102 bps

Bank of America BankAmericard Basic Visa sign of things to come?

Bank of America recently launched the BankAmericard Basic Visa, featuring a single APR of Prime +14% (17.25%) on purchases, balance transfers and cash advances, and no default rate.  The card also has no over-limit fee, a flat late fee of $39, no introductory offer, and no universal default.

Given the arrival of new credit card legislation in the coming months, this type of pricing could become the norm in the coming quarters.  The card launch also reflects a bank-wide emphasis on clarity.  In April 2009, the bank introduced the Clarity Commitment for mortgages, and extended this to home equity loans in November.  It also recently launched online advertising, promoting “clear, easy-to-understand products.”

This card is a part of a suite of BankAmericard-branded credit cards, which also include Visa, Cash Rewards Visa Signature and Power Rewards Visa Signature.  These cards have an APR range (10.99%-19.99% on Visa, and 12.99%-20.99% on Card Rewards and Power Rewards).  And the three cards have a 24.24% rate on cash advances and 27.24% default rate.