Where is the Credit Card Market Headed?

Credit card portfolio growth is slowing amid continued portfolio sales while member balances are rising.


Credit unions continue to exit the credit card business as a result of increased competition from larger issuers, such as Citibank and JPMorgan Chase. Between March 31, 2004 and March 31, 2005, 60 credit unions with outstanding balances of $1 million or greater sold their credit card portfolios. These balances totaled over $378 million, with an average portfolio balance of approximately $6.3 million.

Many credit unions are drawn by the lucrative one-time gains that result from selling off their portfolios. Others believe that their money is more effectively allocated elsewhere or that they lack the necessary expertise to compete with the major players in this highly concentrated industry.

According to a Public Broadcasting Service (PBS) study, which cites data from the Nilson Report and the Federal Reserve Bank of Philadelphia, the top ten credit card issuers held approximately 89.5% of the market in 2004. This figure will rise as a result of Bank of America’s pending agreement to purchase MBNA.

Growth in total credit card balances over the past five years has been stagnant, in part because of credit unions that sold their portfolios (see graph).

Although portfolio growth is slow, total balances have not declined significantly, in large part because average card balances are rising. At year-end 2004, the average balance totaled $1,848, up from $1,732 in 2003 (see graph below).

According to Visa Research Services, citing data from the Nilson Report, charge volume on general purpose credit cards has grown steadily since 1997 and is projected to reach $2.4 trillion in 2008, up sharply from $1.7 trillion in 2004. Given these growth trends, the business remains an area where credit unions can thrive, especially given the high profit margins. However, credit unions clearly remain divided when it comes to selling their portfolios or retaining the services in-house.

Callahan & Associates conducts a semi-annual non-interest income survey, using this data to provide participating credit unions with actionable insights into how their peers are earning non-interest, or service, income. Participants receive free analysis and valuable information to improve their credit union’s performance. To participate in Callahan’s 2005 Second Quarter Non-Interest Income Survey please click here.




Aug. 8, 2005


  • The credit union's should before selling the product see the income that the credit card produces overall. We are a small credit union with just under a million in credit cards. After comparing expense to profit in the overall of the product we are earning 12%. This is better than cars or home equities. We are trying to increase our card product.
  • It was not in depth enough about the costs to a CU to offer a competitive product to their Members that would compete with the larger issuers. Far too often a CU does not know what their total program is actually producing.
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