Credit Cards Tell Strong Story


In the December 2011 quarter, U.S. credit-card debt rose 1.6% from the September quarter, the first gain since the December 2008 quarter. The number of times consumers authorized lenders to request their credit reports in the last six months — a key indicator of credit demand — increased 3% and now stand 16% above a low from the March 2010 quarter.

The number of U.S. credit-card accounts remained roughly flat over the last two years. But with the current 386 million accounts 22% below the prerecession peak, companies exposed to the credit-card industry see room for improvement. Credit-card use is growing faster overseas than in the U.S., so the domestic data presented below understates the global upside.

An increase in Americans' desire to borrow represents good news for U.S. companies, particularly those dependent on consumer spending. Increased card usage should also benefit MasterCard ($431; MA) and Visa ($120; V), which collect fees on card transactions.

Visa's U.S. payment volumes rose 10% year-to-year in February (6% without the leap year's extra day) versus 7% growth in January and December. Excluding the extra day, MasterCard's gross dollar volumes jumped 14% in the first two months of 2012.

Visa raised the low end of its target range for annual sales and per-share earnings in early February. Meanwhile, MasterCard's debit-card business continues to gain market share, helped by new regulations requiring more than one network for debit cards. MasterCard, reviewed in Market Commentary, is being dropped from the Focus List but remains a Buy and Long-Term Buy. Visa is a Buy and a Long-Term Buy.

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