Over the last 24 months, the credit card industry has seen a lot of pitfalls and suffered some blows. The profits of the credit card companies began to evaporate when consumers started spending less on cards and did not make their payments on time. Now, the newer rules and regulations being passed by the federal government are preventing the card lenders from increasing the fees on their cards and altering the terms of credit card issuance.
On February 22nd, 2010 the CARD Act came into effect. This Act has not earned the appreciation from the banks and other financial institutions because it prevents them from increasing the interest rates for the first 12 months. Even after this time period elapses, the higher rate of interest can be levied only on the new purchases made by the customer after that time period. If the payments made by the credit card holders are more than the minimum amount due, then, the lenders have to apply the balance to the card that carries the higher rate of interest.
The CARD Act, which put a smile to the face of the consumers, did not go well with the credit card lenders. The shares of the lenders declined in value. While the shares of VISA dropped by 17%, the shares of Mastercard saw a 21% drop in value.
The good news amidst this downfall is that the investors can buy more at lower prices. Despite this Act and slight fears of recession still prevailing, these two financial majors will still trend positively.
Both these companies, MasterCard and Visa, outperformed themselves in the first quarter posting results that exceeded their expectations. The future growth chart also looks to be positive. Mastercard expects a 9.4% increase in revenue in 2010 and a 11% increase for 2011. In contrast, Visa showed more optimism by projecting the revenue growth at 15% and 14% for 2010 and 2011 respectively. Visa is looking forward to a 33% increase in the per share value in 2010 and 21% increase in 2011. MasterCard on the other hand, is expecting an increase of 22% per share value in 2010 and 19% in 2011.
Irrespective of the slight financial instability in certain parts of the world, US consumers are now much more stable and showing signs of recovery. Credit card companies and retailers now have a reason to celebrate since the US consumers are now willing to spend using their cards and most of them are also making their payments on time.