Study Shows Fewer Credit Cards Issued
A recent survey conducted by financial organizations has found out that the credit card market has shrunk significantly since the start of the economic crunch. Credit industry experts believe that because of the financial crisis, banks and lenders have scaled down the number of credit cards they have issued in an effort to minimize losses.
Analysts explain that lower revenues, combined with rising charge-offs and delinquencies have forced many card companies to cut back on issuing new credit and debit cards. This has resulted in far fewer cards in the market. In fact, the study commissioned by the Finance and Leasing Association (FLA) found out that most of their members showed reduced business volumes last year. The survey compared the business level during this year's month of July compared with July of last year. The association discovered that overall, businesses registered 17 percent less business volume.
Despite the decrease, many members of the FLA say that the contraction is slowing down and is expected to revert to growth sometime in the near future. Fluctuating unemployment figures are causing confusion among economic analysts. The credit industry relies greatly on jobless rates to map out potential losses in the coming months. Experts say that the relationship between the number of unemployed Americans and industry business levels often dictates how much card companies have to prepare.
Many experts of the FLA also believe that stability is slowly returning to the credit market amidst the latest figures. Even economic analysts are becoming optimistic over the long-term forecast for the credit industry.
Some analysts warn that the introduction of tougher regulations can result in fewer lenders extending credit to potential borrowers. This can mean that many Americans will have to forego credit in a time where high-paying jobs are increasingly becoming scarce. Experts point out that with the credit industry still staggering after reporting massive losses earlier this year, the landscape of the credit card market may change dramatically. Many sources from the different card companies believe that firms will be more careful when choosing whom to issue credit and debit cards.
In fact, the number of mail solicitations sent by card companies to American homes has declined significantly, indicating a possible shift in policy. Several financial analysts believe that this radical change in marketing strategy may indicate that card companies are trying to mitigate potential risks and losses in the future due to defaults.
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