Credit card companies like Visa (NYSE:V) have recently been benefiting from soaring credit card usage, reports CNN Money. These enterprises stand to profit from rising consumer willingness to pay for goods and services on credit as opposed to debit. If this trend continues, these companies may see their stock valuations increase. Visa’s competitors in the U.S. include MasterCard (NYSE: MA), Discover (NYSE:DFS), and American Express (NYSE:AXP).
Trefis current says the Visa is worth $90.05, which is in line with the current market price. However as Visa is the largest issuer of credit and debit cards in the United States, there is upside to this forecast given the recovery in consumer spending – much of which is on credit cards.
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Credit card use plummeted with the arrival of the “Great Recession”, when many people began saving and paying down debts. During this period debit card use climbed. Now analysts report this trend is finally reversing. Since April of this year, and especially over the past month, consumers have been reaching for their credit cards again as the economy looks to be in the early stages of recovery.
Credit card transactions rose 8.2% in the first quarter of this year, 9% in the second quarter, and 10.6% in the third quarter, according to industry data. That compares with gains in debit card use of 9.6%, 8.3% and 5.9% for the same quarters. The trend continues this holiday season. Credit card purchases on Black Friday jumped 7.4% from the same day a year earlier while debit card use only increased 3.4%.
To capitalize on this trend, payment companies are offering rewards programs and other incentives to convince consumers to stick with their credit cards. For example, Visa recently unveiled its new “Shopkick” program, which rewards mobile phone users for using their Visa cards in stores. The credit card giant hopes this will convince consumers to use Visa payment methods more often.
Prospects for Visa and its competitors look optimistic. Javelin Strategy & Research recently projected online credit card use will rise 63% from 2011 to 2016, compared to a projected 2% increase in debit card use. The internet has proven to be a huge boon to credit card companies in the past, and if current trends continue the web will only make these companies even more valuable going forward.
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