For two companies battered by a nationwide credit crunch and consumer-spending squeeze, Visa and MasterCard have emerged surprisingly well.
Visa is expected to show earnings of 91 cents a share for the final three months of 2009, its fiscal first quarter, when the credit-card company reports Wednesday. That compares with 78 cents a year earlier. Revenue is expected to be $1.9 billion, up about 10% from the prior year, according to analysts polled by Thomson Reuters.
Rival MasterCard will follow on Thursday, with expected fourth-quarter earnings of $2.80 a share, compared with $1.87 a year earlier, and revenue of about $1.3 billion, up 6%.
The improvements are due partly to cost-cutting and partly to consumers’ relentless move toward spending with plastic, particularly debit cards, instead of cash and checks.
Visa and MasterCard run the networks used by merchants and credit-card issuers, so they get paid for swipes of plastic.
Now, the business cycle is finally working in their favor.
Consumer spending, for one, is showing signs of life.
Average monthly retail sales rose 1.7% in the final three months of 2009, according to Deutsche Bank, compared with a decline of 2.4% in the third quarter.
Major card issuers have reported average volume growth of about 5% for the fourth quarter compared with a year earlier, according to Lazard Capital Markets, reversing a 4% decline in the third quarter.
Meanwhile, the consumer-credit spigot is gradually loosening. In the fourth quarter, U.S. banks reported a slight increase in willingness to make consumer loans for the first time in nearly three years, the Federal Reserve said Monday.
And while high unemployment remains a headwind, the American Bankers Association reported last month that consumer-loan delinquencies in the third quarter fell across seven categories, including autos, boats, recreational vehicles and personal loans. That also was the first time in three years such broad-based improvement has been seen.
Tighter credit-card regulation and worries about the economy have held down shares of Visa and MasterCard this year. But if the recovery turns out to be anything other than anemic, their performance could lead the charge.
Comments
Hi Tracey,
I was wondering… What should with those credit cards when I pay them off? Should I keep them open or close them?
Thanks
#Lynn R
Dover DE
i just want to say,even though i have a very high credit rating,mastercard sent me a letter 2 months ago stating it was going to raise my interest up 4% more before the deadline takes effect. we called our legislator with our complaint and received a letter skirting the issue.
#this is the deal in our opinion…our government talked to the credit card lobbyists and told them the new rules that were to be put in place in feb. 2010. but the credit card companies would have a free hand in raising interest rates until that deadline. by doing this the government would look good to the public and the credit card companies could get what they wanted. anyone with a fair amount of brain cells should have closed any loophole for these credit card companies to up their interest rates.
thank you for listening.
Lynn,
Here is an article that may help you with your question
#http://credit.about.com/od/toughcreditissues/a/closecards.htm
Do you Want to say something?