January 21, 2009
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News: Visa & MasterCard Declined by Low Spending.
After working so hard all these years to become the most accepted credit card names, these credit card associations are losing ground for a totally different reason. After building so much success with the merchants in retail, now they're faced with the consumer market. Having made it so easy to obtain credit cards and use them in almost every purchasing situation, they've found that most of those consumers have backed away from using their cards. Not their fault, of course but, because of an uneducated market, the cards have largely been abused over the last several years.
The mega-credit card lending banks like Citigroup, JP Morgan/Chase/Wamu, Capital One and Bank of America are all teetering from being so top-heavy with weak foundations. The VISA and MasterCard credit card associations have done their part in providing consumer protections from their ends but, unfortunately, the lending banks haven't done so well with their own management. This doesn't mean that those banks have been reckless, like the mortgage banks (or divisions). It just means that they didn't have a good enough disaster recovery plan.
So now, the consumers are hurt, the banks are hurt and, lastly, now the referee is being hurt. All the Big credit card lenders are reporting deep declines for last quarter from a year ago. Investors are concerned. B of A is the worst off with spending reduced by 17.2 percent, followed by Citigroup down 15 percent. Next comes JP Morgan/Chase, losing 8 percent. Overall, results are even worse than projected and now, even the card associations are getting worried. Both VISA and MasterCard have been downgraded on Wall Street and their shares have fallen 7.8 percent and 5.1 percent respectively. Globally, the world market is not hurting as much as ours. So, the biggest weights are tied to the US market and, unfortunately, this holds 60 percent of the VISA market and 41 percent of MasterCard's.