U.S. credit boom bodes well for MasterCard, Visa
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U.S. credit boom bodes well for MasterCard, Visa

American credit scores just hit a record high, meaning credit cards are once more a mainstay of U.S. consumption payment chains. In fact, credit card circulation in the country has hit pre-recession levels – strongly indicating that industry heavyweights Visa and MasterCard are set to continue reaping the rewards of a healthy economy that’s moving further away from cash by the day.

Visa and MasterCard’s share prices have both risen by over 20% this year

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SOURCE: Yahoo Finance

According to data analytics company Fair Isaac, Americans’ average credit score hit 700 in April, the best it’s been in 12 years. Only 20% of Americans have scores below 600, which is down from 25.5% in 2010. The Wall Street Journal puts this down to time alone: Financial difficulties caused by the recession are now starting to fall off credit histories.

It’s already clear that the banks have taken advantage of this – banks lend more to those who have good credit scores and are therefore not seen as “risky investments”. According to credit monitoring company Transunion, 171 million U.S. citizens now have credit cards.

The benefit for MasterCard and Visa comes from the way they charge for their services: they charge merchants and banks for each card transaction made. The proliferation of credit cards is a clear sign that Americans will soon be using plastic more than cash, and that is phenomenal news for two of the world’s largest cashless transaction providers.

Disclosure

Dominion holds both Visa and MasterCard in its Global Trends Ecommerce Fund.


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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.