Credit card borrowing expected to increase significantly in next five years

In the last several years, consumers have had their credit card borrowing habits reshaped considerably by the recession, and the effects of those changes are expected to last for some time.

However, experts now say that consumers will likely increase their borrowing once again over the next several years, which could be a boon to credit card issuers, according to new data from the industry research firm IBISWorld. In the five years prior to the start of 2012, credit card revenues slipped at an annual rate of 4 percent to $50.8 billion, led largely by the significant declines in revolving credit use and increased delinquency rates between 2007 and 2010. Currently, those problems result in issuers losing about 26.3 percent of revenues, though that has declined slightly in recent years.

"Increasing unemployment, high consumer debt, falling property prices and in some cases, negative equity, have driven the rise in charge-offs and delinquencies," said IBISWorld industry analyst Eben Jose.

But as credit cardholders return to the use of their cards for everyday purchases – even if they don't carry a balance from one month to the next – revenues for card issuers will increase, the report said. In 2011, they jumped 3.9 percent, and are expected to increase another 3.8 percent by the end of this year. That trend is expected to continue over each of the next five years through the end of 2017, particularly driven by online and mobile commerce, as consumers generally move away from using cash to make everyday purchases, as well as increasing rewards benefits that lure new customers to credit card issuers. And at the same time, lenders' profit margins will likely increase as well, as consumers become more conscientious toward and financially capable of making regular on-time payments in full.

Lending will likely become more concentrated

Currently, the number of consumers who use credit cards is largely concentrated within the portfolios of the nation's four largest lenders: JPMorgan Chase, Bank of America, Citi and American Express, the report said. Altogether, they account for 84.4 percent of the entire lending market, though generally, Capital One and Discover are included in the group of top card issuers as well. In the five years prior to this one, concentration into these lenders has increased, and will likely continue to do so as the larger companies acquire or merge with competitors with smaller market shares.

Consumers who are returning to credit card borrowing in earnest may first want to consider the benefits of checking their credit reports. By doing so, they may be able to identify any unfair markings that can have a negative impact on their credit standing and therefore can lead to them receiving less desirable terms on the new accounts they're opening. Working with a credit repair firm can help to clear up any of these markings.