On a beautiful “rise” day for the stock market in general, the shares of the credit card giant Visa (NYSE: V) It was more than most – almost three times what it was Standard & Poor’s 500, In fact. By the time trading closed for the day, Visa stock was up 4.3%.
You can thank The Wall Street Journal For this.
In a front-page article in the Business and Finance section of Al-Khamis newspaper, magazine It reported that “credit card apps hit [a] Pandemic “in October. But while that was the headline, the subtitle of this story was even more awesome. As it turns out, nearly 27% of US consumers in October said they had applied for a credit card in the past 12 months.”
One in 4 Americans has applied for a new credit card? Do you think this could be good news for Visa’s business? Because I think it might kind of be.
It should be noted that this good news about Visa may not necessarily be good for all the banks that Visa deals with. Like magazine He points out that banks charge interest on balances made month to month, but while consumers seem eager to shop with credit cards, multiple stimulus payments from the government have left them so full of cash that they don’t necessarily need to carry a balance these days (and pay interest on that balance). ).
The result: “Credit card balances remain $123 billion less than they were at the end of 2019.”
This is actually kind of bad news for banks, who bear all the costs of extended credit, but not all of the profits they would like to make, in the form of interest payments on credit card debt. However, that’s not a problem for Visa, which charges a transaction fee of between 1.3% and 2.5% on every sale made with its cards – whether or not that sale generates interest for the banks.
Simply put: More cards means more money for Visa, which is why the stock is up today.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.