Falling delinquency rate could signal spike in new credit card deals

By , CardRatings contributor
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Instant approval credit card offers could ramp up again in 2011, if industry analysts' predictions about major lenders come true. According to a report from Fitch Ratings, U.S. credit card portfolios improved again in the first quarter of 2011.

Just as unemployment figures have dropped in most parts of the country, the percentage of "written off" credit card debts has also fallen. After a few years of record highs, this key indicator has dropped to an average of 6.34 percent at the seven largest credit card issuers. Wall Street bears may find themselves breathing a sigh of relief at the news. However, aggressive investors view the indicator's return to historic norms as an opportunity for aggressive competition.

Banks have already unleashed some of the best credit card deals in recent memory to attract high value customers. Fitch's analysts reported that competition may force major banks to extend offers and increase credit lines to drive portfolio expansion. Although Fitch rates the consumer finance sector as stable through 2011, analysts expressed concern that banks will have to grow their overall lending portfolios through the year to improve investor earnings.

Best credit card deals still to come

A brightening employment outlook can help bank managers feel more comfortable about expanding personal credit card lending, especially as the mortgage market has yet to bounce back from its recession-driven lows. Yet, many credit card issuers seek solutions to growing profits in a regulatory environment that threatens to squeeze profit margins on fees and finance charges. According to the Association for Financial Professionals, partnerships between retailers and credit card issuers could help drive new revenues without significantly increasing risk.

A study released this month at the AFP Retail Roundtable revealed that many mall stores and main street shops would change their overall banking relationships if offered benefits like less expensive fees for processing partner credit cards. With personal finance marketing rules significantly changed after the enactment of the Credit CARD Act, Fitch analysts anticipate new kinds of partnerships and deals between banks and retailers in the coming months.

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