Card Companies Earnings Could be Sapped by Late Payments

NEW YORK – Credit card company profits could be crimped if oil prices remain near their recent highs long enough to pinch U.S. consumer spending and hamper their ability to pay bills on time, industry analysts said.

“The more prolonged the higher price of oil remains, the more it becomes an issue for consumers and credit card companies,” said Neil Abromavage, analyst at Deutsche Bank Securities Inc. “I don’t want to be alarmist, but clearly it is something that needs to be monitored.”

Analysts said while the fear of a surge in defaults in the near-term remains low, credit card issuers could see more money tied up in delinquent accounts if customers, particularly those with marginal credit, have difficulty adjusting to higher costs associated with increased energy prices.

That in turn could pinch profits as credit card companies are forced to set aside more money for late payments or defaults.

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