The credit card industry has shown signs of stabilization following years of contraction, but the recovery remains uneven. Recent earnings data from Visa and Mastercard indicate that credit card payment volume has improved over consecutive quarters, suggesting that consumers and businesses may be regaining confidence in spending. However, broader indicators of consumer borrowing continue to paint a more cautious picture.
While payment activity is an important measure of industry health, credit card accounts tell a different story. The sharp decline in active accounts over the past several years highlights the lasting impact of tighter lending standards, consumer deleveraging, and changing financial habits. Understanding the relationship between credit card payment volume, consumer credit trends, and credit card accounts provides valuable insight into whether the market is experiencing a genuine recovery or simply a temporary rebound in spending activity.
With the release of Visa and MasterCard Q3 earnings data, we can see a bit of hope in that combined Visa/MasterCard credit card payment volume appears to be stabilizing, if not growing (up two quarters in a row).With the thrill ride of the last two years, itis perhaps too early to declare an outright turn around. We have certainly seen no encouraging signs from the Fed’s G19 reading on revolving consumer credit, which remains in the red.
Often neglected as we watch for signs of hope, is the number of credit card accounts on file. This indicator remains persistently negative, and Visa and MasterCard collectively lost over 27 percent of credit card accounts on file since Q1 2008.As the sum of all purges-driven by both issuer and consumer decisions-this statistic is a drastic drop by any standard. It is amazing to see growth in payment volume while the base of accounts continues to shrink; some cardholders, both business and consumer, must have decided that itis OK to spend again!
Perhaps we will know a real turnaround is at hand when accounts on file start to grow again. Until then, the hard fact is that credit cards are a shrinking business.
Although rising payment activity is an encouraging sign for the payments industry, the continued decline in credit card accounts suggests that the sector has not yet fully recovered. Consumers may be spending more on existing cards, but the overall pool of active accounts remains significantly smaller than it was before the downturn.
A sustained turnaround will likely require growth in both credit card payment volume and the number of active accounts. Until account growth returns, the industry’s recovery story remains incomplete, underscoring the ongoing challenges facing issuers and the broader consumer credit market.
