Pummeled in the Recession, Credit Cards Get Back on a Growth Track

After taking a nasty hit in the recession, credit cards are back on their feet, though somewhat wobbly. Figures from First Data Corp., the largest U.S merchant processor, show that credit card usage is sustaining growth after returning to positive territory in early 2010. Data from the bank card networks also show positive trends in credit cards, although the U.S. has 120 million fewer credit cards in issue than it did in early 2009.

The usage data come from First Data’s SpendTrend report, which compares same-store dollar and transaction volumes on credit, debit, and electronic benefits transfer (EBT) cards from merchants on the Atlanta-based processor’s various platforms for at least a year. In April, credit card charge volume grew 7.4% over April 2010’s levels, and transactions grew 4.6%. Higher dollar versus transaction growth indicates a rise in the average ticket. First Data doesn’t release the raw numbers behind the changes.

Credit still isn’t matching the growth in debit cards, which are now America’s favorite non-cash payment type, according to the 2010 Federal Reserve Payments Study. In April, signature debit dollar volume grew 9.9% year over year and transactions 9.5%. Comparable PIN-debit increases were 7.2% and 4.8%, respectively, First Data reported.

But credit’s fortunes are looking a lot brighter than they did in 2009 and early 2010, when same-store dollar volumes fell for 14 straight months, often by double digits and bottoming out at -14.6% in May 2009. “It was an incredibly tough period,” says Susan Fahy, vice president, global information and analytics solutions at First Data.

While growth has been uneven at times, credit hasn’t had a negative monthly change in either dollars or transactions since February 2010. Factors driving credit’s recent growth include higher gasoline prices, not surprisingly, and, after massive cutbacks, resumption in credit card mailings. “Issuers…are sending out more offers whereas they had held back for a while,” says Fahy.

Meanwhile, Visa Inc. reported U.S. credit card payment volume of $199 billion in its second fiscal 2011 quarter ended March 31, up 9.1% from the year-earlier quarter, while credit transactions increased 7.8% to 2.28 billion. The average Visa credit card purchase was $87.13 in the quarter, up 1.4% from $85.89 a year earlier At MasterCard Inc., credit and charge card purchases totaled $115 billion in the first quarter, up 4.9%, on 1.37 billion transactions, up 2.8%. MasterCard’s average credit ticket increased 1.7% to $84.00 from the year-earlier quarter’s $82.58. And American Express reported that U.S. card-billed business jumped 15% to $124.1 billion in the first quarter from $108 billion a year earlier.

Credit cards still haven’t fully recovered from the bloodletting of the recession, however. Issuers wrote off billions of dollars in bad debt and closed millions of accounts. U.S. Visa issuers had 267 million credit cards in issue as of Dec. 31, 2010, the latest date for which figures are available. That’s off 10% from 297 million cards at the end of 2009 and 20% from 335 million in December 2008, according to quarterly filings from Visa. MasterCard’s U.S. credit and charge card count was 170 million as of March 31, off 6% from 181 million in March 2010 and 23% from 222 million in March 2009.

The Federal Reserve reported this month that revolving credit outstandings, most of which are credit card debt, stood at $796.1 billion on a seasonally adjusted basis in March, off 5.2% from $840.1 billion in March 2010 and 18.2% from their peak of $973.6 billion in August 2008. Revolving credit, however, did increase at annualized rate of 2.9% in March, only the second such monthly increase in two-and-a-half years.