Monthly Archives: March 2013

Different Cultures and Different Card Philosophies From America to Europe

How Do Europeans Differ From Americans With Credit Card Usage

There are noticeable differences in the way that people use credit cards all over the world. One huge day and night contrast can be found between Europeans and Americans. More Europeans are stepping into the shadows of Americans that use credit cards heavily, but there is still a big extreme between the two cultures.

Credit Card Companies Lose Money in European Culture

In some markets, credit card volume can be so low that some credit card companies like American Express actually struggle to find a profit.. Ironically, this has caused a lot of credit card companies to pursue Europeans even more. They want customers that are spending more money. Once Europeans start charging more credit card companies are able to get more with interest rates. In most cases Europeans are charging a lot less than 5%. In many instances the Europeans are only charging small rates like 1% or 2%. This is why there are fewer deficits and less economic crisis conversations in the European culture.

Maxing Out American Culture

In American people are spending. Lots of people that had high credit scores have seen these scores decline over time. It has been difficult for many Americans to resist the urge of charging now and paying later. This concept has been something that has only gotten worse.

More Americans are spending and getting even bigger balances that they cannot pay. This is one reason that the economic conditions are getting a lot worse over time. This American culture is obsessed with using credit cards for shopping and dining out. Lots of Americans will essentially spend money on things they may not even need.

Narrowing the Spectrum

For a long time there has been a big gap between Europeans and Americans in terms of credit. There is still a large extreme, but the differences are starting to narrow as more Europeans embrace some American cultures. Fast food, for example, has started to creep into the European culture. This may seem trivial, but this actually marks the signs of Europeans embracing American concepts. Spending in Europe is still not as high, but there are some changes that are making credit card companies happy.

Americans may be trying to clean up their credit histories, but Europeans are actually considering doing more spending. Europeans have not totally embraced the habits of American culture, but there are more comparisons that are being made between the behavioral patterns. Both of these groups are seeing the benefits of using credit cards. The difference, however, is that Europeans are more cautious. Americans have no boundaries to their spending. Most Americans are willing to risk maxing out their cards out because this is part of the culture.

There are all types of ways to use credit cards. Some consumers pay off their cards in full. This is more common in Europe. Others may only pay the bare minimum or nothing at all. That is much more common in America. The culture for Europe promotes less extravagant lifestyles and this equates to less unnecessary spending.

How Credit Cards May Be Impacted By A Return To Record High Stock Market Levels

Stocks soar and the government goes into a sequester, so what is going to happen to consumer finances and the credit card industry. The short term answer would be not much is likely to change. While the stock market is gaining traction, there is little evidence that the FOMC will be changing their outlook on the economy and growth any time soon. This means that they are not going to be altering the prime rate, which Is one of the key drivers with the rates that card companies may charge consumers (those with variable terms) and you should anticipate rates for variable finance products (credit cards, equity loans, variable rate mortgages) will remain pretty steady this year.

The major rebound in the stock market has been slow to filter through into most of the major banks that offer consumer credit cards (Citi, Bank of America, Capital One, Discover) aside from Chase most major banks are trading well off from their 2007 levels. Where the stock market has returned to pre economic crisis levels, most bank stocks are still trading at 40% of their highs from six years ago. These finance conglomerates are still stuck with large portfolios of bad financial assets and have struggled to regain the confidence in the Markets. Rising home prices and a stabilized real estate market will certainly help move things in a better direction, but in the short run, there is not a ton of optimism for this segment of the market, at least by most investors.

So from Wall Street back to Main Street, don’t expect major changes in the credit card industry. The consumer watchdogs seem fairly content with the current regulations and have other larger fish to fry (title or payday loans) and most consumers will likely see the increased offers and promotions from card issuers in their mailboxes for the near future. While zero percent offers for over 18 months with little to no fees may not be available, there are a lot of great cards with rewards, perks and new innovative promotions that are worth checking out (like the Discover IT) card. 2014 is heading in the right direction, the markets certainly a telltale sign, there is a lot of time left to improve your financial position and eliminate debts.