Credit card boom predicted for 2012
When the big-six credit card companies published their November figures earlier this month, things were looking good. According to a Dec. 15 report from Moody’s Investors Services, rates for late payments and defaults had recovered from their recession and post-recession highs and were back to normal.
Credit card debt less of a problem
In its coverage of the data, The Washington Post quoted Jeff Hibbs, an analyst with Moody’s, who predicted that the default rate could drop still further: to under 4 percent from November’s annualized level of 5.2 percent. When you remember that it peaked just 18 months ago at 10.44 percent, that’s a pretty amazing decline.
Of course, much of that fall is almost certainly down to many Americans taking a more responsible attitude to their finances and actively paying down their credit card debt. However, the Post points to two other factors:
- About $75 billion in credit card debt has been “charged off” (written off credit card companies’ books and passed to collection agencies) since the start of the recession, according to Moody’s.
- TransUnion says that over 8 million consumers dropped out of the card market between when the recession began and the end of 2010. Presumably, some of these voluntarily cut up their own cards, while others saw their accounts closed unilaterally by their credit card companies.
Whatever the causes, few would be other than very happy that card debt today is less of a problem for millions of American families than it has been recently.
Credit card offers set to rise?
Credit card executives are as cheered by this news as the rest of us. Their balance sheets have for years been burdened by charge-offs and provisions to cover future charge-offs, and now that they’re largely free of those it’s like a return to the good old days of high profits. Just last week, for example, Discover Financial Services announced that it would increase its dividend to 10 cents from 6 cents, a jump of 67 percent, according to The Chicago Sun-Times.
And, as those executives bellow out their “Happy days are here again” refrain, they’re looking for ways to make the good times even better, both by taking market share from each other, and by growing the overall market by welcoming back into the credit card fold at least some of those whose poor credit scores had previously excluded them.
As was reported in the IndexCreditCards.com news blog a few weeks ago (Credit card debt nightmare to return?): “…between July and September of this year, more than a quarter (25.2 percent) of all new cards issued went to subprime borrowers,” according to data from TransUnion. The Washington Post expects more of the same, remarking: “…potential customers with moderate credit scores should find cards easier to obtain in the coming year.”
True, there’s as yet little sign that card issuers are returning to their pre-credit crunch habit of seemingly mailing plastic to consumers on the basis of a single lending criterion: the ability to mist a mirror. However, the ever-increasing volume of credit card offers being sent to an ever-widening pool of consumers may be reason for concern.
It feels so good to know that for many consumers credit card debt is no longer a major issue. Let’s at least pause to enjoy the novel sensation before re-creating the circumstances that led to problems in the first place.
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