Each quarter, banks release critical information about their financial standing to shareholders. This information also helps analysts survey the market for credit cards. As of its most recent quarterly report, it appears as though the credit card market may be making a rebound.
Discover Financial Services reported that its customers are using their cards more often in 2012 than in 2011. Also, the company sees improved financial management - more consumers are paying their bills on time.
By the Numbers
The company reports that its sales volume increased five percent in the most recent quarter over the year ago period. Credit card balances swelled by four percent in the same time, while total transaction volume also increased five percent in the same period.
Much of the industry's recent success can be attributed to improving default rates. The delinquency rate for all loans more than 30 days past due fell to 1.9 percent from 2.8 percent a year ago. A falling delinquency rate can substantially increase a bank's profit, reduce borrowing costs for other customers, and lead to a more healthy banking system in general.
In fact, Discover describes its current loan performance as something historic. The company said its loans charged off fell to 2.8 percent from 5 percent a year ago, a level which it believes is a historic low in the business. Other companies have also reported much better lending conditions. Ford Motor Credit, a division of Ford Motor Company, reported a record low in its charged off accounts for vehicle financing and leasing services.
Consumer Banking Rebound
Traditionally, consumer financial products have been the first to drop in recession and the first to lead out of one. A recovery in consumer lending could lead to improvement in larger financial services sales like mortgages or home equity lines of credit.
For now, any improvement in credit cards should be seen as a bright spot in banking. Despite banks most recent troubles in mortgage lending and fears about a European slowdown, American credit card users are there to prove that a small corner of the market is doing better than ever.