Credit Card Industry Analysis

Learn about the dynamics governing the credit card indsutry

What is Credit Card Industry Analysis?

A credit card industry analysis helps determine the current state of credit card-issuing companies and their latest products and services. The credit card industry is anchored on continued innovations in marketing and technology, leading to increased competition among credit card companies.

Credit card companies invest billions of dollars into marketing activities, with the goal of acquiring new customers and growing their customer base. Innovative marketing activities, such as reward programs, discounts, loyalty points, and zero interest rates, are being deployed in an attempt to get more customers into the programs.

 

Credit Card Industry Analysis

 

The average American owns at least three credit cards from different issuers and an average debt of $10,000, which shows the great demand that exists in the market. The US credit card industry is dominated by major credit card issuers, such as American Express, Visa, Mastercard, and Discover.

The credit card issuers rely on intermediates such as banks, which are in direct contact with clients. The market share for the issuing cards is controlled by large banks, such as Chase, Capital One, and Citibank.

 

 

Quick Summary

  • In credit card industry analysis, find out about the industry’s current state and the latest products and services offered by credit card-issuing companies.
  • Key players in the industry include card issuers, banks, regulators, governments, and the expansive client base.
  • The credit card industry’s largest beneficiaries in the US are banks, such as Citibank, Chase, etc., and issuers, such as American Express, Visa, Mastercard, etc.

 

Market Growth

Credit cards are becoming less of a source of credit and more of a transactional platform. Many credit card users are switching from being credit seekers to regular users of credit cards in place of cash. More users are using credit cards as a transactional medium due to convenience.

Credit cards provide greater convenience since users do not need to carry large bundles of cash to make purchases. The credit card industry also offers a platform where one can track their spending and consequently adjust their spending accordingly. However, credit cards also come with limitations, and they are at risk of fraud and identity theft.

After experiencing a downturn during the 2007/2008 recession, credit card use is growing in popularity again, with new credit card issuers entering the market with new innovative products every year. Nowadays, the vast majority of credit card users regularly use credit cards to make online transactions, with the average user owning at least three credit cards.

 

Market Gaps

The biggest opportunities in the market still revolve around the reward systems initiated several years ago. To a large extent, reward systems help boost the growth of the credit industry by finding ways of retaining clients and attracting new users. The reward system offers both bonuses and promotions, which may differ from one company to another. The rewards may be in the form of welcome bonuses, zero interest rates for a defined period, and reduced costs for quick repayments.

A great opportunity also awaits in the improvement of customer experience. The majority of customers feel that there is room for improvement in consumer-friendly communications. Some of the areas that can be improved include disclosures, clarity in rewards promotions, forfeiture, and expiration communication. Effective communication will result in better customer experiences.

 

Costs Related to Credit Cards

The costs incurred by credit cardholders include interest charges, processing fees, taxes, and other charges. Foreign transaction fees may be charged when the user makes international payments outside the county of issue. Complete disclosure is required from the issuer, and credit card users should be aware of all the charges that are associated with using a specific credit card.

Interest rates form the biggest percentage of costs that are charged on credit cards, and they make up the second-largest cost of owning a credit card. An interest rate is calculated on the balance in the credit card at any particular time. Therefore, credit cardholders with revolving balances must pay high interest on credit, while those with zero balance in the credit card do not pay interest until they top up the credit card balance.

Credit card issuers also charge a late payment fee if the holder makes a payment past the due date. An over-the-limit fee may also be charged if the holder incurs purchases that exceed their credit limit. Regulators overseeing the credit card industry exercise control over the fees charged on customers by giving conditions on the circumstance under which fees can be imposed on customers.

 

More Resources

CFI is the official provider of the global Certified Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

  • Annual Percentage Rate
  • Credit and Collections Analyst
  • Payment Processing Fees
  • Types of Interest