Market Report: Seven Factors Influencing the Credit Card Market

With credit card debt accounting for about 80 percent of the total debt purchasing and collections activity within the accounts receivable management industry, any major factors influencing the credit card market are a top concern for both creditors and debt collection agencies. 

In a recently completed sector report, “Seven Factors Influencing the Credit Card Market,” Kaulkin Ginsberg Consumer Finance Analyst Dimitri Michaud reviews some of the major factors that have influenced the credit card market throughout 2007 and into 2008.  An overview of the job market and income growth, and their impact on consumers, will help to clarify why growth itself remains one of the most important influencers in the credit card market. 

In 2004 there were 1.4 billion credit cards of all types in circulation held by 164 million consumers.  In that same year, the volume of credit card spending was $1.9 trillion, resulting in over $800 billion in outstanding debt, according to the U.S. Census Bureau.

The Census also predicted that by 2009 the corresponding figures would increase to 1.5 billion credit cards held by 176 million cardholders – an estimated 8.5 cards per cardholder – with $2.7 trillion in spending that would create an estimated $962 billion in outstanding debt. But real growth has already nearly outstripped those estimates, with the Federal Reserve reporting $961.8 billion in outstanding credit card debt at the end of May 2008.

In addition, the report’s overview of the housing market turmoil, the continuing credit crisis, and the impact of the economic slowdown will help explain why the credit card market and its accompanying debt have not been shielded from the issues of credit quality deterioration that have been experienced within other debt types.

With charge-offs on consumer loans outstanding rising from $8.5 billion in the fourth quarter of 2006 to $16.2 billion in the fourth quarter of 2007 – an increase of over 90 percent – credit card charge-offs increased by only 33 percent in that time frame.  Most industry observers agree that this upward trend will continue into at least the early part of 2009.

As Americans continue to increase their reliance on credit card spending to make everyday purchases, the rapid growth witnessed within the card market is more than likely to continue and will only amplify the need to understand what factors have and will continue to influence the credit card market.

The sector report is available for free to members of insideARM.com. Membership to insideARM.com is also free. If you’re not already a member, please register. If you are a member, be sure to log in before trying to download the report.