Big Banks Want More of Your Credit Card Business
- May 11, 2018
- Posted by: Andrew Rombach
- Category: Credit Card News
Big banks in the U.S. are making a strong push into the credit card industry.
With outstanding credit card debt on the rise, credit card companies stand to make a lot of money from borrowers who are often paying high interest rates and cash advance fees. In particular, Goldman Sachs Group Inc. and Wells Fargo & Co. are making a push towards credit cards, hoping to cash in on the heavy profits in that market, Bloomberg reported. And they’ll be heavily targeting new customers.
From 2007 to 2009, cardholders were collectively carrying more than $1 trillion in outstanding credit card debt, which means a steep profit margin for companies. That number quickly dropped off as consumers became increasingly worried about the economy and appeared to put a greater emphasis on paying off debt to better secure their financial outlook. By 2011, the collective amount of outstanding credit card debt had dropped to less than $850 billion.
As the impact of the Great Recession began to fade a bit from people’s memories, that outstanding card debt balance began to climb gradually. It was climbing slowly until 2016, when it really took off. In January 2016, the collective outstanding balance was $911 billion. But as of February 2018, that amount had increased to $1 trillion.
Both Goldman Sachs and Wells Fargo are likely looking for a market that promises nice returns, and the credit card industry seems to offer that since borrowers are being less careful about keeping a running monthly balance.
But just how successful can either company be in carving out a larger chunk of the credit card market this late in the game? They will be competing against companies with their feet firmly in the door.
Right now, the top three companies that have cardholders with the highest outstanding credit card balances are JPMorgan Chase, Citigroup, and Bank of America.
How Much Do American Consumers Lose on Credit Cards?
Americans who receive offers from credit card companies might want to hold off on filling them out until they look at the numbers relating to the credit card industry.
In 2017 alone, credit card lenders earned $182.7 billion from cardholders in fees and interest, Bloomberg reported. The average household credit card debt in 2017 was $8,600, and the average interest rate was 16.8 percent, MarketWatch reported. And as interest rates climb this year, people who carry credit card debt could feel the crunch.
While it can be a good idea to hold one credit card to boost your credit score, experts recommend handling it responsibly by paying off the balance in full each month.