U.S. credit card companies are working to get households to borrow more as families participate in the country’s economic rebound by using the money they saved during the pandemic rather than the new borrowing that comes with and stimulates generally economic increases, reported the Financial Times (FT).
Online offerings from businesses seeking new customers increased 85% in May 2021 compared to May 2020, FT reported, citing data from Competiscan, an analytics firm.
Balances owed on credit cards issued by the nation’s largest banks fell between 9% and 14% for the first quarter of 2021 compared to the first quarter of 2020, according to FT.
Credit card companies are partly using the proven tactic of offering zero percent interest rates on transferred balances for up to 18 months, FT reported.
“Balance transfers are really the engine that helps issuers keep outstanding amounts on the books,” Jessica Duncan, director of Payments Insights at Competiscan, reportedly told FT, adding that these same clients tend to have more credit risk. important, creating a challenge for lenders.
“[Lenders] still have to be careful, but they just lost a percentage of the balances they didn’t anticipate, and they also have a bottom line to keep in mind, ”Duncan said, per FT.
Competistican also found that credit card companies tripled borrower credits in the first quarter of 2021 compared to the first quarter of 2020, according to FT.
Rewards programs were also more popular among credit card companies in 2020 than had been widely anticipated, Wolfe Research analyst Bill Carcache reportedly told FT.
“Despite speculation that credit card rewards were getting too frothy and that issuers would be forced to cut them in the next downturn, rewards hit all-time highs in 2020,” he wrote in a note to clients, by FT.