In an effort to compensate for the deteriorating levels of disposable income, consumers have turned to credit cards to fund luxury purchases a source close to Cornerstone Worldwide.
The trend saw Visa Inc., the world's largest credit and debit-card company; post profits up 41% said the source.
In a statement, the company said that net income rose to $422 million, or 51 cents a share in the fiscal third quarter, from $299 million a year earlier.
Cornerstone Worldwide reportedly speculated that, in light of the continued squeeze on incomes attributed to the slowing US economy, the shift to card spending is likely to mitigate much of the impact of economic weakness in the US.
People tend to purchase essentials including food and gas with debit cards, which are linked to checking accounts, and use credit cards for luxuries reasoned the Cornerstone Worldwide source. Rival American Express is not as well-positioned as Visa and MasterCard as they do not make loans to cardholders.
However, Cornerstone Worldwide are thought to believe that this trend sets a dangerous precedent which may exacerbate already precarious levels of indebtedness among US consumers.
