The recent financial crisis has taken its toll on just about every company in America, both big and small, but few have felt its effects as much as the banking industry. Of course, many could make the argument that it was indeed caused by financial institutions to begin with.
In any event, credit card issuers including American Express, Discover, Bank of America and Capital One were hit extremely hard due to delinquencies and defaults. When people no longer pay their bills, the credit card companies have to eat the loss and that wreaks havoc on the bottom line.
Recently released data suggests that some credit card companies felt the sting worse than others as a recovery, albeit a slow one, appears to be in the works.
It appears as if the credit card issuer that is in the best position to take advantage of an improving economy is American Express. Amex traditionally focuses on higher end clients and businesses and is now starting to see a precipitous decline in late paying customers at a faster rate than its competitors.
For other credit card companies it is a different story. Capital One and Bank of America both focused their credit card business heavily on customers with less than stellar credit ratings. That has come back to haunt them in a big way as their delinquency rates continue to climb.
Discover also is suffering from delinquency rates. As unemployment improves so to should the bottom lines of all credit card issuers as people are in a better position to be able to afford to pay their bills. But unemployment is a lagging economic indicator and we have yet to see any real improvement nationwide.
What explains the quick recovery of American Express as opposed to their counterparts? The company has taken an aggressive stance against issuing cards to risky customers. They have also severed ties with many customers that they deem to be potential credit risks.
They were also hit quite hard because of their heavy exposure in California and Florida. It appears as though the real estate bubble, which was especially bad in those two states, had a ripple effect on the credit card market as well. The real estate market is showing signs of stabilizing which is good news for credit card companies.