“Although credit cards dominated the U.S. market for decades, it’s clear that a seismic shift has started taking place, and they will likely become obsolete in a generation or two.” That is a direct quote from Hiroki Takeuchi, co-founder and CEO of GoCardless, in a recent article published by Tearsheet. We are hearing similar musings from others in the industry. While there is no argument about the increasing availability and popularity of alternative payments options such as Buy Now, Pay Later (BNPL), and that for many consumers, debit is the payment method of choice, the downfall of credit cards is grossly exaggerated.
Credit Card Growth Languished During Early Pandemic
Certainly, credit card growth – in terms of accounts, spend and balances – struggled, particularly during the early pandemic environment. According to the Fed’s monthly report on consumer credit (the G.19) in September, total revolving debt had declined by 12.4% at the end of July 2021 since its December 2019 peak. Benefiting from issuer accommodations, government stimulus programs, a ban on evictions and suspension of student loan obligations, among other factors, consumers have been paying down their credit card debt since the pandemic first took hold.
Due to shutdowns and general fears about being in public spaces, in-person shopping activity came to a near standstill. While recovering to a large degree in many sectors, some areas of consumer spend continue to lag their pre-pandemic levels, particularly travel and entertainment, where credit cards are a significant form of payment. In addition, while resuming recently, issuers severely curtailed their new account acquisition programs, and large national issuers in particular lowered credit lines on new and existing accounts.
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