The credit crunch hits the credit card industry
8 ideas to help credit card issuers manage through the downturn
The credit card marketplace is not impervious to the credit crunch. Credit card providers are under extraordinary stress, and Canadian issuers who do not take precautions against portfolio risk during times of economic uncertainty may begin to see an increase in delinquencies and, ultimately, defaults from credit card customers.
Uncharted waters for credit card issuers. Managing your business in volatile times: 8 ideas to help manage your credit card portfolio through the downturn provides suggestions on how Canadian credit card issuers can effectively manage their credit card portfolios to decrease risk and plan for long-term profitability. By reducing automatic credit limit increases, troubleshooting delinquent customers, and watching for early warning signs, such as increased use of cash advances, companies can better protect themselves in these uncertain times.
This report is based on findings from recent interviews with management at major card issuers in Canada. Results found that Canadian issuers are faced with new risks as consumers have increased their debt-to-disposable-income ratios more than 130%, higher than the current U.S. rate. Additionally, most executives have seen a rise in delinquencies of 5% to 10% — which have increasingly resulted in write-offs for credit card issuers.
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