Credit cards have given new life to finances and the ability to spend money. Nowadays, purchasing merchandise and paying for services do not require cash or check writing transactions. All you need is a credit card with a sufficient balance on it to cover your expenses, and you are able to buy whatever it is that you need to purchase. However, with the increasingly rising use of credit cards, few consumers are aware that even with swiping the credit card, the purchase is only made temporarily because eventually, you have to make payments on the card to cover the amounts already taken off of the card. Not only that, you have additional processing and interest fees that must be paid as well. Because of that, consumers are constantly battling with credit card debt, either getting out of it or trying not to get into it.
Credit Card Spending Trends
In a study conducted in 2013 by the Federal Reserve, payment trends including long-term and short-term that took place during the years 2000 up until 2010 were examined. It was concluded that there were various transactions that involved card not present transactions on general purpose credit cards. This type of transaction means that the consumer was not able to present an actual credit card. These types of transactions typically take place over the internet or the telephone. The information taken from the study also showed that these types of transactions are becoming increasingly popular as the sale of merchandise online constantly increases. In fact, the trend increases at a rate of 25% or more each year, and currently almost $1 trillion is made in online spending.
Credit card companies are very mindful of this increasing trend. In fact, more credit card companies are shifting their standards in an effort to get more individuals interested in using their credit card. This puts consumers at risk for racking up further debt. In America, the average credit cards debt is approximately $8,000 per credit card user, and the APR averages at almost 13%.
Exchange Traded Funds (ETFs)
Because of the above study conducted in May of 2014, investors who have their funds invested into the world of retail have strengthened their investments by turning to exchange traded funds, or ETFs. Exchange traded funds gives a solution for retail investors who are looking for more exposure to more industries, commodities, and investment opportunities. However, exchange traded funds are not available to help those investors gain access to the credit cards industry. Any investor who wants to purchase stock in a credit card company is recommended to focus on the publicly traded credit card companies. Those companies are:
- Visa with a market cap of $163 billion.
- American Express with a market cap of $94 billion.
- MasterCard with a market cap of $89 billion.
- Discover with a market cap of $29 billion.
Credit Card Growth and Predictions
When it all boils down, consumer credit depends primarily on the state of the economy as a whole. When the economy is good enough for consumers to benefit financially, they are more able to make more purchasing leading to the retail industry increasing in profits and the economy improving all together. However, when the economy is decreasing, consumers become overwhelmed with making enough money to cover the expenses that are on their credit cards. This causes a decline in customer spending and an incline in consumer debt. This also results in the limited use of credit cards in general. Overall, the negative impacts that credit cards have on the economy of the country and the overall debt of consumers have made possible investors turn a blind eye to the credit card industry.
Out of all of the popular credit card companies, Visa seems to be the strongest competitor among MasterCard, Discover, and American Express. Each trade on the market as resulted in a strong up-trend. If any investor were to pinpoint an ideal credit card company to invest in, Visa would be a good start, especially with its reported market cap being approximately $163 billion. Discover card, being the least used credit card company is slowly but surely making its way into consumers’ purses and wallets. Although its market cap is barely at $30 billion, it has improved on its quality as a credit card company, which is another company investors could be more interested in. its increasing quality has outdone its competitors in performance.
The rise of using credit cards as an alternative to using cash or writing checks have become a popular trend for Americans. Although credit cards are a convenient way to make purchases, it is also responsible for placing a huge debt on consumers and the country as a whole. So where does that leave investors interested in cashing in on credit cards? It is difficult to tell, but it is apparent that credit card companies are aiming at increasing their business to encourage more investors to hop on board.