Capital One is Expected to Improved the Consumer Spending in 2011
Capital One's credit card portfolio has improved from $18.4 billion in 2007 to $19.6 billion in 2008 having a growth rate of 6.5%. With the possession of Chevy Chase Bank in 2009, it has further led to an increase in the average loans outstanding by 6% to $20.8 billion. It is expected that Capital One will continue to develop its credit card balance even in a slower rate, given the strong effects of recession on consumer behavior. Capital One tries to contend with JP Morgan, Bank of America, Citigroup and American Express in the credit card business.
Despite the fact that it is anticipated for Capital One's credit card loan will get to $24 billion by 2013, Trefis members foresee a level of $28 billion, putting a slight advantage to the price estimate for COF stocks. It currently has a Trefis price estimate of $50.53 for Capital One's stock which is about 23% above the present market price.
The Effect of Recession on Consumer Spending is Uncertain
As reports regarding spending have usually been positive, a lot of macro concerns remain involving the elevation in unemployment and a slow economic resurgence. This could reflect on the confidence concerning credit card spending. At the start of the year, a survey made by the Federal Reserve Bank of Boston in January 2010 which had 45% of respondents presented their unpaid credit card balance that has declined during the past 12 months. Barely 26% have increased over the same period. This development may unhelpfully influence the average gross credit card balance all through the Trefis project period.
Yet, the effect of the recession is varied, with the current movement demonstrating positive spending outcomes. Based on the MasterCard Advisors' SpendingPulse, that tracks the spending transactions pertaining to cash, spending is up in the entire retail categories in comparison with the previous year. SpendingPulse documented retail sales starting from October 31 and up to December 11. Online sales presented the biggest increase, 13%, from the similar time last year.
One of the causes why holiday sales are rising is that consumers have additional savings. According to the US Bureau of Economic Analysis, non-refundable personal income in the Q3 2010 increased 3.4% over the year before, to $11.4 trillion. We are aware that going into 2011 will provide a clearer movement on consumer spending together with excellent loans.
Card Act Can Encourage Customer Confidence
The US Congress accepted the Card Accountability Responsibility and Disclosure (CARD) Act in 2009 which hopes to launch equal and apparent practices in relation to the expansion of credit under an open end consumer credit plan. The Act needs the cardholders to be secured against uninformed interest rate increases, due date tricks, and deceptive terms, and that credit card companies must equally credit and assign payments and not compel too much fees on cardholders.
We are aware that this move will improve the transparency among consumers and credit card companies and enhance consumer confidence in spending. We anticipate that this action will be advantageous to companies such as Capital One and may result to a potential improvement of loan balances.
See Also
Student Credit Cards Canada
Rewards Credit Cards Canada
Prepaid Credit Cards Canada
Points Credit Cards Canada
Platinum Credit Cards Canada
Gold Credit Cards Canada
Bad Credit Cards Canada
Balance Transfer Credit Cards Canada
Best Low Interest Rate Credit Cards Canada
Rewards Program Canada
External Links
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