Credit card companies as of late have started to hike interest rates at a furious pace leaving millions of Americans frustrated and upset with rising credit card bearing costs. Banks imposed fee increases despite of the fact that millions of Americans are facing economic hardship, with a number even being pushed to declaring bankruptcy.
Revenues in some areas of the card business are also taking a hit, with delinquencies and charge offs on the increase for this year, a reflection of the overall poor economic conditions.
Fitch Ratings predicted that for next year, rates of credit card delinquency will continue to soar, bankruptcy cases will still be high, and unemployment rates will further slide. These factors will have a severe impact on credit card companies' profitability, on top of a looming legislation that would restrain banks' abilities to increase fees, and make other charges.
Fitch also reported that credit card purchases have also declined in the past quarter by 13.7% raising further concerns on companies' profitability in the short term. Analysts are pessimistic about the prospects of the industry and are closely observing adaptive practices companies are employing and developing during these tough business conditions.
Research have an indicated a trend among American consumers of paying off their balances while putting away money and increasing their savings. At this point, consumers are still cautious about the prospects of the economy and are holding on to their money, refusing to return to their carefree freewheeling spending days. Consumer spending is still down and economists are hoping for purchases to pick up during holiday season, which would signal improving economic conditions.
Recent developments, however, may give card companies a reason to celebrate. Lately there has been an observed improvement in the spending behaviour of affluent customers, with purchase volume up; experts see a good sign of better things to come.
Analysts are hoping that the holiday season would prompt a surge in consumption and retailers are hopeful that store discounts and price cuts would inspire consumers to start flocking stores and do some serious shopping. However, we have yet to fully see if the recession has greatly affected consumption habits and practices of the general public.Credit card companies are tossing coins in wishing wells praying that changes are temporary and that people would go back to their healthy consumption habits. Come next year, the odds would be heavily stacked up against them and they would have to really dig deep in their arsenal to continue to remain highly profitable in the long run.