Issuer Cutbacks Result in 104 Million Fewer U.S. Credit Cards

Profits and overall transaction volumes are still growing for Visa Inc. and MasterCard Inc., but the bank card networks' latest quarterly numbers show just how severe the cutback by recession-racked credit card issuers is becoming. In fact, there are about 104 million fewer credit cards circulating in the U.S. today than there were a year ago. MasterCard's U.S. credit and charge card issuers had 220 million cards outstanding as of June 30, according to the financial report MasterCard released Friday. That's down by 54 million, or 19.7%, from the 274 million credit/charge cards outstanding as of June 30, 2008. Visa's U.S. credit card count fell by 50 million from year-earlier levels for the quarter ended March 31. At that time, U.S. Visa issuers had 318 million cards outstanding, off 13.6% from 368 million as of March 31, 2008. Visa on Thursday reported financials for its third fiscal 2009 quarter, which ended June 30, but the network reports most operating statistics on a quarter-trailing basis. Visa's U.S. credit card payment transactions fell 3.9% to 2.08 billion in the quarter ending March 31 from 2.17 billion a year earlier. Credit payment dollar volume slipped 9.7% to $176 billion from $195 billion in fiscal 2008's third quarter. The combination of lower transaction volume and an even greater change in dollar volume dragged down the average credit card purchase to $84.49 in the fiscal third quarter, off 6.1% from $89.99 in the prior-year period. On a percentage basis, the story was even worse for MasterCard. Second-quarter credit card purchase transactions fell 5.8% to 1.50 billion from the year-earlier quarter's 1.59 billion, and credit card purchase dollar volume slumped 15.6% to $120 billion from $142 billion. The average credit card sale thus declined 10.2% to $80.16 from $89.31 a year earlier. MasterCard's credit card numbers likely were influenced by the recent financial travails of Citigroup Inc., its biggest issuer. “You have issuers peeling back, particularly inactive cards,” says consultant and former MasterCard executive Steve Mott, who heads Stamford, Conn.-based BetterBuyDesign. “While MasterCard, Visa, and the big banks that dominate the business have worked assiduously to keep the credit card market from reaching its natural maturation state, I think those efforts have finally reached an endpoint, and that the product is becoming mature.” The networks' U.S. debit card volumes are holding up, but as with credit cards, average tickets are declining as consumers cut spending. Visa reported a 10.3% increase in third-quarter debit payment transactions to 5.42 billion from 4.91 billion a year earlier. Debit payment volume, however, grew only 4.7% to $202 billion from $193 billion, which means the average debit ticket fell 5.1% to $37.28 from $39.28 in fiscal 2008's third quarter. MasterCard enjoyed an 11.3% increase in debit card purchase transactions in the second quarter to 2.11 billion from 1.90 billon in 2008's second quarter, but dollar volume, which rose 3.8% to $82 billion from last year's $79 billion, didn't keep pace. Thus, the average second-quarter debit card sale fell 6.8% to $38.79 from $41.60 a year earlier. Despite weak credit card volumes and slowing debit card growth, both bank card networks last week still reported strong profits thanks in part to expense control, growth in fee revenues and, in Visa's case, gains from the initial public stock offering of its Brazilian subsidiary. Visa posted net income of $729 million in its third quarter, up 73% from $422 million a year earlier. MasterCard reported second-quarter profits of $349.1 million compared with a loss of $746.7 million in the prior-year quarter. Visa's profit sparked an angry reaction from the Food Marketing Institute, the supermarket industry trade group. “Visa's announcement that their net income rose 73% to $729 million is a reflection of the outrageous credit card fees supermarkets must pay to Visa and their banks every time a customer swipes a credit or debit card,” the statement from FMI president and chief executive Leslie G. Sarasin says. “The very businesses that fuel local economies and keep people employed are harmed by continually rising fees that result in expenses higher than even health care and energy costs.” In response, a Visa spokesperson referred to a statement from Visa chairman and chief executive Joseph Saunders in the earnings release, which says, “throughout this challenging time, the resiliency of our debit products and our credit products overseas continue to exemplify the resiliency and stability of our business model.”