For credit card issuers, there’s plenty of room at the top

Credit card issuers are an exclusive bunch, with a relatively small number of names dominating what is a major industry.  One of the main reasons for this is the consolidation that has joined once-separate credit card issuers.  Recent history reflects this.  In 1990, the top 10 general purpose-card issuers held 56.5 percent of the market.  By 2004, the top 10 saw their market share leap to an estimated 89.5 percent, with Visa and MasterCard together holding about 70 percent of the credit card market.

Within the past decade, acquisitions by credit card companies have been a major factor in firms gaining market share.  The merger madness began in 1996, when Chase purchased Chemical for $13 billion.  The next year saw Bank One’s acquisition of First USA for $23 billion, Citi’s purchase of AT&T for $15 billion, and Fleet taking on Advanta for $11 billion.  Then in 1998, Bank One purchased Chevy Chase for $5 billion and First Chicago for $18 billion, while Bank of America gobbled up Nations for $9 billion. 2000 was the year MBNA bought First Union for $6 billion, while Citi picked up Associates for the identical sum. Bank One purchased Wachovia for $7 billion the following year.  In 2002, Chase paid $8 billion for part of Providian.  Next, HSBC acquired Household for $17 billion in 2003, the same year Citi got Sears for the price of $11 billion.  In 2004, JP Morgan Chase purchased Bank One for $76 billion, while Bank of America acquired Fleet for $17 billion.  Finally, Bank of America’s $35 billion merger with MBNA took place in 2005, the same year that Washington Mutual bought Providian Financial for $6.5 billion.

Last year’s merger involving Bank of America made the nation’s third-largest bank also its largest credit card issuer, with 40 million active accounts containing $143 billion in outstanding balances, as of 2005.  Chase, Citi, Capital One and Discover round out the top five rankings within the industry.

Figures from the end of fiscal 2004 showed Visa holding 39.8 percent of the U.S. credit card market with $526.87 billion in purchases and cash advances, MasterCard with 30.2 percent of the market share and $399.90 billion, American Express with 23 percent and $304.80 billion, and Discover Card with 7 percent and $93.67 billion.

Meanwhile, although credit cards bear the logo of Visa, MasterCard, or one of the other networks, they are actually issued by banks.  The leading U.S. bank credit card issuers are Bank of America, J.P. Morgan Chase, Citigroup, Capital One, and HSBC Bank.