The credit (and debit) card world is a happening place. Though
the Credit Card Act of 2009 -- and consumers' changing behavior --
are crimping card companies' style, investors still have much to be
Reasons to worry
The Credit Card Act has reined in late-payment fees, which could
cost issuers more than $3 billion annually.
Discover Financial Services
) CEO David Nelms expects this change to cut $80 million to $90
million from his company's pre-tax income. The Federal Reserve is
also looking into similar reforms for the debit card industry.
Meanwhile, watchdog Elizabeth Warren of the new Consumer Finance
Protection Bureau aims to vastly simplify credit card agreements.
Card issuers may no longer be able to hide unpleasant details in
Most notably, consumers are finally paying down debt. According
to credit agency TransUnion, the average total debt for bank-issued
credit cards was recently at $4,951, down 13% from year-ago levels.
(That's also the first below-$5,000 number since 2002!) This is
good for borrowers, but not so great for lenders, who kind of like
the fat payments they receive from customers carrying a hefty
Reasons to smile
All is not lost, though. The members of this creative and
resourceful business are still finding ways to plump up their
For starters, they're casting a wide net for new customers. Odds
are, you've noticed more new-card applications appearing in your
mailbox lately. These mailings are up 83% over last year's level,
according to a study from Synovate Mail Monitor, and that's just an
) has recently quadrupled its number of mailings, while
) has tripled its volume.
Minimum payment sums are also rising to bring in more revenue.
This is actually a win-win development, since paying more can help
dig out of debt
faster. Perhaps most powerful of all, interest rates for borrowers
have also increased, from an average of 13.1% in the second quarter
of last year to 14.7% recently. (With overall interest rates at
record lows, credit card issuers can reap phenomenal profits here.)
Card companies have rushed through these increases ahead of new
reforms taking effect this month, which will make such rate hikes
If the credit and debit card business ever looked attractive to
you, don't rule it out now. Despite its new challenges, the
industry still has plenty of ways to generate revenue. You might
also consider looking elsewhere
for big profits
-- there are plenty of other attractive businesses that aren't
facing so much government scrutiny. Found a few that interest you?
Keep track of them automatically by adding them to our new
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