by Joseph Kenny | 03/18/09
Reports are coming in recently that credit card providers across the country such as Capital One Financial Corporation, American Express Co, and Discover Financial Services relate the tale of massive gains in their industry and sectors throughout recent months.
Overall, it seems the credit card industry is enjoying a more responsible and capable customer base, with consumers paying their cards on time more frequently, and keeping their balances at an overall lower level. This is just part of a recent trend being reported that a new "age of responsibility" seems to be falling upon the American credit industry, but it remains an important step.
To be specific, Capital One has showed gains of more than 5 percent in their shares, closing in the market recently at nearly 9 dollars a share. Meanwhile, competitor Discover Financial rose an impressive 5.3 percent per share, to close at $5.21, one of the lowest rates in the market, but still quite respectable and a definite improvement from recent trends. Meanwhile, American Express seems to be doing the best of all, boasting 3.7 percent gains, to close at a value of $10.64 per share.
This news also comes on the tail of other reports that the number of delinquent payments from consumer cardholders has dropped a significant 11 percent since just a year ago. With more people paying their cards on time, this is thought to be one of the major contributing factors to the sudden upturn in their market share. Other factors thought to be contributing are lowered advertising costs that accompany the fact that the majority of people now already have a credit card of some stripe, and that increased fees are putting more money in the pockets of lenders.
As for which investments are wise, there seems to be a lot of consensus that MasterCard is poised to perform quite well in the coming months, set as it is to "outperform" its competitors such as Visa. It's worth keeping an eye on Capital One as well, analysts say, as they are making movements to cut their dividends to 5 cents per quarter, down a huge amount from their current 37 ½ cents, something that will likely save the company around 500 million a year. Basic investment know-how suggests that looking out for companies making internal maneuvers of this sort may be a good way to broadcast future gains.
What's most interesting, however, is that these unprecedented gains in credit card company shares has occurred at a time when the rest of the market, including the major indices that forecast and track market movements have been on a constant downward shift. Therefore, it might be best to take this good news with a sense of caution. Rather than a sign of a real shift in the economy, it might simply be a sign that more people are using credit cards as a means to live and pay their monthly bills than for extravagant luxury purchases or the like. That being the case, a collapse would be destined to follow quickly after. As with all matters concerning credit in this day and age, the wise borrower is advised to proceed with caution.