Banks Look for Credit Card Revenue to Rebound Post-Pandemic
As restrictions from the COVID-19 pandemic let up and stimulus checks stop arriving to Americans, big U.S. banks are expecting credit card balances to start increasing again. Lenders like Capital One, Citigroup, and JPMorgan have sent out more promotions to enroll new customers and have increased digital marketing on sites like Facebook and Instagram.
“The big banks are ramping up in anticipation of the recovery post-pandemic,” said Andrew Davidson, from the marketing-tracker Mintel Comperemedia, according to Reuters. “They are really trying to make up lost ground from last year.”
The Federal Reserve Bank of New York found that card balances declined 14 percent during the pandemic. Lenders have eased credit standards in anticipation of a credit increase, since the U.S. government offered benefits like stimulus payments and unemployment payments to let Americans spend money while paying down card balances throughout the pandemic.
As lockdowns start to ease, major card lenders have expressed optimism about increased consumer spending, especially for travel and entertainment, which was down 80 percent at the start of the pandemic. In anticipation of credit increases, Capital One is gradually increasing credit limits.
The Federal Reserve found that while balances fell, the number of credit card accounts increased during the last two quarters, and a decline in credit lines stopped in the March quarter. Also, the American Bankers Association found that accounts with revolving balances fell to 39.7 percent at the end of 2020, compared to 44.1 percent the previous year.
Since the industry has a better understanding of the post-pandemic economy, big banks will likely try to get customers to borrow more on credit cards. Any shortfalls will help banks earn double the return on assets with cards compared to other businesses.