William Armstrong

Credit Card Issuers and Processors - How They're Faring in the Crisis

I beleive that the risks in credit card portfolios are being exaggerated. The dynamics of the credit card business are fundamentally different than the dynamics of, for instance, mortgage lending. Credit card portfolios on the books of Citi or JPM or pure plays Discover and Amex, are funded at a relatively low rate of interest and earn a very high rate of interest. The spread must be on the order of 10%. This is a heck of a cushion that can pay for a lot of loan losses. The same spread in mortgage lending is on the order of 1-3% leaving not much cushion at all.