August 25, 2010
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News: A Humbling Credit Card Industry
While consumers have been successful in reducing credit card debt, lenders continue to look for ways to offset losses from interest income and fees. Experts say that in spite of the implementation of new types of fees, is isn't likely that credit card companies will be able to recoup more that 25 percent of the lost income. Although lenders have posted profits over the past quarter, Americans continue to reduce spending and lower debt. Members of the card industry had believed that the slowdown of consumer spending would be short lived; however, cardholders have proven to be more committed to reducing debt than the credit card industry had hoped. Nevertheless, a recent survey by J.D. Power and Associates indicated that most cardholders are not willing to give up their cards nor are they willing to switch lenders.
According to the J.D. survey, 22 percent of credit cardholders said they would not be switching lenders over the next 12 months; down from 25 percent the previous year and 30 percent in 2008. The results mean that lenders will need to do some fast stepping creative marketing if they expect to lure cardholders away from their competitors. JPMorgan & Chase, one of the nation's largest credit card companies, will be running ads set in more upscale ski resorts and Hawaiian vacation hot spots in an attempt to lure the affluent customer away from American Express. Citigroup, on the other hand, will be targeting the cardholders who have become discouraged by their financial struggles and looking to rebuild their credit.
Bank of America has taken their business in a completely different direction by focusing on private label in the retail industry as well as other mass marketing credit cardholders. Capital One Financial will be picking up where Bank of America left off with the affinity card business as it continues to expand its private label business as well. For the time being, it appears that Americans have regained control of the market as lenders become more humbling.