Credit Card Portfolios Finally Expand – Is... - Card Issuers News

ADVERTISING DISCLOSURE

ADVERTISING DISCLOSURE:
Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » News » Card Issuers » Credit Card Portfolios Finally Expand – Is Revolving Debt Shrinking?

Credit Card Portfolios Finally Expand – Is Revolving Debt Shrinking?

After bottoming out in 2011, credit card issuers are beginning to see their portfolios grow again, says global ratings agency Fitch Ratings. Credit card purchases rose 7.6% in 2010 and 9.7% in 2011 while lending portfolios shrunk 8.0% and 1.6% during that time, but American Express, Capital One, and Discover all posted modest portfolio growth at the end of 2011. Fitch says that this could be because card holders are increasingly more likely to be transactors than revolvers.


Consumers who repay their full balances every month are known as credit card transactors, while those who simply pay their minimum balances and maintain their credit card debt are called credit card revolvers. Revolving debt – the type that is offered by credit cards – is generally easy to get but can be difficult to for consumers to get out of if they spend beyond their means and fall behind on payments.


Revolving Around Rewards


Part of the reason for the shift away from revolving debt, according to Fitch, might be because consumers are making better use of credit card rewards programs. They also say that the Durbin amendment, which caused the extinction of rewards programs on debit cards and checking accounts, may be having the effect of encouraging more people to use their credit cards for everyday transactions, which they are easily able to pay off in full.



(click to view larger)


In order to take the fullest advantage of credit card rewards programs, cardholders should not carry revolving debt that accrues interest. If they do, the rewards are almost always completely nullified by the interest that the cardholder pays on their revolving balance.


For example, let`s say you carry $3,000 of debt on a card that offers 3% cash back on all purchases (a higher-than-average reward amount, just for the sake of illustration) and carries a fixed APR of 14.99%. You make about $1,000 in purchases each month, which you pay off, but that $3,000 sits on the card accruing interest and you are unable to zero out the balance. Are you really earning anything from that cash back rewards program?


Vanishing Cash Back


The answer is no. Over the course of one year, the $360 you earn in cash back will be eaten up by over $1200 in interest charges. Not only that, if you continue that spending pattern, you’ll never get out of debt.


The smartest thing to do in that situation would be to transfer that $3,000 balance to a new card that offers a long 0% APR introductory period – some cards offer intro periods of up to 21 months. Ideally, you`d find a deal that offers no balance transfer fee, but even if you paid, say, a 3% balance transfer fee ($90), you`d still be saving a bundle not paying that interest charge every month. Without that interest fee you`d have a much better shot at paying the entire balance off before the 0% interest rate expires.


Less revolving debt is undoubtedly good for the American economy, while portfolio growth is good for business. Fitch Ratings believes that most credit card portfolios will see expansion in 2012 as the economy continues its recovery.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:

Related News:

MasterCard and Fred Segal Open Shop on the Strip

Posted: April 20, 2018

MasterCard and Fred Segal have opened Rock ‘n Roll Holy Land on Sunset Strip, an immersive exhibit giving people an insider’s view of the history of the Sunset Strip. The shop also puts a unique digital spin on window shopping using ... Continue reading
New Amex Centurion Lounge Opening in Denver

Posted: April 19, 2018

Are you a regular at Denver International Airport (DEN)? If so, you may want to check out the new Centurion Lounge when it opens next year. It’s stated to be the eleventh lounge in the Centurion line up. Offering airfield views and taking ... Continue reading
Crate and Barrel and Synchrony Bank to Offer New Credit Cards

Posted: April 18, 2018

Do you shop for furniture and household wares at Crate and Barrel? If so, you might be interested to know that the home furnishings retailer has inked a deal with Synchrony to offer customers not only new credit cards and financing ... Continue reading
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
We'll match all the Miles you've earned at the end of your first year. For example, if you earn 30,000 Miles, you get 60,000 Miles.
For Excellent, Good Credit
Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs up to the quarterly maximum each time you activate.
For Excellent, Good Credit
Our application is quick and easy with instant pre-qualification available
For Fair / Good Credit
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!