Major names in the credit card industry, such as Visa and American Express, are expected to see big profits this holiday season, even as most consumers say they will make a greater effort not to take on credit card debt, according to a report from Reuters.
For example, the report said while just a small percentage of shoppers say they'll use their credit cards as their primary payment method this holiday season, Visa can still profit from another form of payment likely to be more popular: debit cards. The payment processing giant is not only the world's largest credit network, but also handles more debit transactions than any other company. So even when consumers use pieces of plastic that draw from bank accounts, it will still receive a portion of the cost of that purchase. MasterCard will also likely benefit from this new trend.
Meanwhile, consumer sentiment has improved significantly in the last few months, and that likely means good news for American Express, the report said. This is because the lender tends to have a wealthier cardholder base, and more affluent consumers are more likely to take on credit card debt rather than use cash or debit when they make their holiday purchases.
"We think consumers are ready for a sentiment shift and some retail therapy, if only for the holiday season," S&P Equity Research said in a note on the holiday sales forecast, according to Reuters.
A number of surveys have found that about 12 percent of consumers will use their credit cards to purchase the bulk of their holiday gifts this year, down from 32.4 percent last year. But the National Retail Federation says holiday shopping is still expected to rise about 2.3 percent this year, the report said. A number of large companies, like Walmart and Target, are also optimistic about sales in the coming month.
Consumers have been wary of credit card debt since the start of the recession, with many cutting these accounts completely. Others have continued to utilize the cards but scaled their use back significantly.