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More Reasons to Worry About Credit Card Companies

by princedamin2011 on Jul 26, 2011

Last month, I showed how massive cuts in idle consumer credit lines could equal hell for credit card processors like Visa (NYSE: V) and MasterCard (NYSE: MA).

Turns out, the problem might be bigger than I thought. The Federal Reserve released its monthly report on consumer credit, and it ain't pretty. Revolving credit balances fell 9.7% in February the largest decline in 31 years.

This creates a two-pronged battle sucking the life out of the credit card industry:

Citigroup (NYSE: C), Bank of America (NYSE: BAC), and JPMorgan Chase (NYSE: JPM) are drastically slashing open lines of credit and jacking up interest rates on existing balances. In the fourth quarter alone, $500 billion of credit-card ammo was yanked away from consumers.Consumers themselves are ditching credit cards like their lives depend on it. With the personal savings rate blowing up and the specter of unemployment on nearly everyone's mind, there's a mass exodus from consumer...Read More >>



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How Do Credit Card Companies Make Their Money?

by aperillo

We’ve all received offers, often quite persistent, to sign up for a new credit card. Credit cards themselves are great, because you can get the things you need even without cash readily available. However, don’t you ever wonder how many credit card companies are out there? Because of the growing market for credit card users, it seems that every day, you get a solicitation letter for a new credit card company. The large playing field results in a lot of competition for credit card companies.

Creditors mainly get their income from the interest and fees on credit cards....

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