When the dangerous credit crisis chook the financial structures of industries worldwide in the year 2008, everyone expected the performance of credit cards to fall back too. However, in the aftermath of this financial disaster, the credit card industry holds the record of shining through the darkness with its impressive performance. While banks played a major contributing role in recession, they also bore the brunt of it, showing deplorable results one quarter after the other, many expected the credit card industry to follow suit. But the profitable performance of the credit card industry sent out a strong message – it was one industry that was here to stay. Many credit cards belonging to public markets outperformed their previous benchmarks by more than 30% of their earlier returns, an astounding performance under a slumped economy.
This impressive performance of credit cards can be attributed to a fall in interest rates after the arrival of recession. Banks, after taking a beating with their financial fallout had no option but to reduce their cost of borrowing in an attempt to lift themselves up from the crisis. And customers were not one to refuse such an attractive opportunity when it came knocking on their doors. In order to comprehend the actual operation of credit cards that led to its glistening performance in the market, it is important to note that credit card firms comprise of a network that is responsible for processing services to the customers. These credit card issuers transfer all payments from cardholders to merchant establishments in a timely manner. This is then followed by merchant establishments paying the determined fees to these credit card companies for processing all the payments. While this constitutes an integral source of their income, one cannot fail to mention the interest cardholders pay towards their credit card balances. This provides the perfect setting for a clean and profitable business model, thereby, leading to high returns. Often, customers are under the influence that credit card houses also issue credit cards to cardholders. Credit card companies are not involved in any business of this sort, which also involves the interest rates levied on the credit card balances of customers and the fees paid by merchant establishments to them for payment processing.
Credit card companies also boast of a number of high value assets and a comparatively smaller list of liabilities. As a result, no wonder investors prefer investing in such high net-worth companies that give a strong promise of consistency in returns and profitability. These credit card companies are constantly engulfed with finance, and can smoothly overcome any financial crisis by merely shifting the burden of their interest risk over to customers. But credit card companies usually refrain from employing investors into their capital funding process as they simply aren’t in any need of them. They usually hold a lot of cash within the organization, and they do not require any form of finance for their heavy capital investments. These companies, even if they go public, never take the decision of acquiring public investors for the purpose of funding. It is merely done for the purpose of image correction or any other such non-financial requirement. Thus, credit card companies are a robust shield that are all set to protect themselves against the wild and inconsistent waves of the economy. These credit card companies that have now been open for public investment provide amazing and profitable opportunities for investors to increase their returns. Their chances of falling into the realms of inconsistency or unprofitability leading to debt are close to null. Thus, as customers of such credit card houses, it would be a smart move to associate with such companies. However, it is important to understand that credit cards are the most expensive form of debt as they carry a huge interest burden on them and buying more debt like personal loan or any other type of loan to repay the debt on your credit card will be completely absurd and will only increase the burden on your finances.