A sign of returning to normal is evident as credit card issuers reposition their strategies to get back into the lending business. Revolving debt in the United States increased slightly in February and March, moving back towards the $1 trillion mark.
Following a peak of $1.082 trillion in 2019, volumes slipped to $974.6 billion in 2020, then slid to $966.4 billion in January 2021, with slight increases to $974 billion in February, and up to $980.4 billion in the latest report by the Federal Reserve for March 2021.
With credit card charge-offs at a record low of 2.53%, expect to see credit card issuers honing their offers. U.S. Bank’s just-announced program is a good example. The Minneapolis Star-Tribune reports that this top issuer launched a “new travel-based credit card” dubbed “Altitude Connect.”
Yes, a travel card. Remember travel?
- U.S. Bank is adding a new travel rewards card, called Connect, to its Altitude series of cards that started last year with Go. The cards are vertically-oriented, in contrast to most credit cards.
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- With many people antsy to travel after a year of not getting around much, U.S. Bank executives think the time is right to launch a new travel rewards card.
- The new card, called Connect and part of its Altitude line of Visa Signature cards, is being rolled out now after being put on hold last year after the pandemic hit, Steve Mattics, head of retail payments Minneapolis-based bank, said.
The card carries relevant rewards for business travel.
- During the pandemic, other travel rewards-related cards retooled a bit to try to stay relevant, offering other non-travel benefits such as food delivery to appeal to consumers who may have been mostly homebound.
- Users of Altitude Connect will be able to rack up 4X points on travel and at gas stations and 5X points on prepaid hotels and car rentals booked directly through its rewards center. It also offers 2X points for grocery delivery and shopping, dining, takeout and food delivery, and streaming services such as Netflix and Spotify.
Today’s WSJ points out a credit card issuer challenge. Credit card interest assessed dropped with the dip in revolving debt, causing angst for large and small credit card firms. As people pay down, less interest accrues, resulting in a revenue shortfall. The Journal paints the picture:
- In the U.S., total outstanding credit-card debt fell by 11%, or $100 billion, between February and the end of June, according to Equifax. April was the largest monthly drop in revolving credit on record, while May was the second-largest, according to Federal Reserve data. Personal-loan originations were down by a third in mid-May compared with the beginning of March, according to Equifax.
- Since February, credit card debt is down 11% in Canada, 14% in the U.K., and 17% in Australia. In the eurozone, credit-card debt and other forms of revolving credit for households fell 5% between February and June.
- But credit-card debt has continued to fall even as lockdowns were relaxed in May and June and retail spending rebounded. Data from card companies indicate that the pandemic has spurred a shift away from credit cards toward debit-card purchases across spending categories, in part due to government stimulus payments, analysts say.
Senior loan officer surveys (SLOOS) indicate a similar trend. Lending standards are returning to pre-COVID levels. And, with that will be more aggressive marketing as we see with U.S. Bank.
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
