Banks looking for new ways of replenishing credit card revenues

Credit cards are no longer a gold mine for Greek banks, as borrowers gradually turn to other, cheaper forms of borrowing, according to research and consultancy firm Lafferty Group. This is confirmed by Bank of Greece data on credit card balances in recent months. The Lafferty Group survey shows that the shrinking of the credit card market will continue, reaching a 9.2 percent decline between 2005 and 2007. This drop will impact on banks’ profits; during 2005, they drew revenues of about 766 million euros from credit cards, with profits from this domain coming to 188 million euros. «Greek consumers are taking advantage of changes in consumer credit laws to borrow more on personal loans, which charge much lower interest rates,» James Buckley, manager of World Cards Intelligence, a research database operated by Lafferty Group, told Reuters in an interview. This country has always shown low levels of credit card usage, with banks resting on the profits they reaped from the high interest rates, averaging 14.5 percent annually. Now they must act to stem their losses. «Greek credit card issuers will have to change their business models to adjust for falling interest income from credit card borrowing,» Buckley said. The challenge for banks now is to encourage consumers to keep using plastic money. Already some banks are trying to boost their credit card commission revenues through various loyalty schemes, while more competition is expected with the supply of cheaper products by the Postal Savings Bank, Credit Agricole and Societe Generale. Banks are also trying to persuade borrowers to refinance their credit card debts via cheaper personal loans, often at the same bank. Bank of Greece data for May showed that Greeks owed 7.4 billion euros in credit card debt, with outstanding balances down 8 percent year-on-year. Personal loans were up 46.9 percent in the same month, as balances hit 10.9 billion. (Kathimerini, Reuters)

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