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Profits for Mastercard and Visa soar with the increase in customer spending

Tuesday, February 22, 2011

Americans are now becoming a little more liberal in using their credit cards for making purchases. The Federal Reserve, on Monday, reported that for the first time since August 2008, the credit card debt showed an increase in December 2010. The central bank also reported that the credit card debt increased by at least 3.5% in December as a result of the lingering real estate and unemployment issues.

After showing a decline for the first three quarters of 2010, outstanding credit card debt rebounded with a 2.6% increase in December. The report also went on to mention that despite the increase in credit card debt, the overall consumer debt for 2010 fell by 1.6%.

Consumer debt, which saw an increase of $7.7 billion in the month of October and $2 billion in November, further increased by another $6.1 billion in December 2010.

The 3% increase in credit card debt in the month of December was way beyond the expectations of financial analysts. This increase clearly showed that customers are now slowly beginning to use their credit cards, showing signs of an economic recovery.

In a client note, Nomura Global Electronic, mentioned that it was surprising to see a 2.3% increase in revolving customer credit, which is largely contributed by credit cards. The company also went on to say that this increase shows that in the past few months many households in America have been putting in an effort to pay off their outstanding balances and bring it down to a limit that can fit easily into their monthly budget.