Price Forecast: Business Credit Card Services

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  • Tags : Finance | Business Credit Card Services | Price trend | Price forecast | Procurement research | Category market forecast

Recent Price Trend - Business Credit Card Services


In the three years to 2017, APRs for business credit cards have risen an estimated 0.6 percentage points. As inflation has been rising and unemployment has approached its natural rate, the FOMC has started to increase the target range for the federal funds rate after nearly a decade of stagnancy. For example, the FOMC voted to increase the target range by 25 basis points in June 2017 following similar upturns in December 2015, December 2016 and March 2017. The current target rate ranges from 1.00% to 1.25%. Most credit card issuers offer variable-rate APRs. These rates are tied to an index that moves in concert with the federal funds rate, which allows credit card issuers to reconcile their own interest expenses. As a result, these upturns in the federal funds rate have contributed to growth in APRs across the market.

Demand for business credit card services has also been increasing during the past three years. Many businesses use credit cards to purchase goods and services in order to facilitate their operations. Therefore, a growing number of US businesses enlarges the customer base for business credit cards and thereby contributes to greater demand for services. In the past three years, the number of businesses has been growing in line with the economy. Moreover, the percentage of services conducted online has been increasing due to the proliferation of technology. To pay for online services, businesses have increasingly required digital mediums of exchange, thus boosting the need for credit cards. Overall, stronger demand for business credit card services has allowed credit card issuers to increase APRs.

Despite rising service rates, price volatility has been low during this period. Credit card issuers have engaged in strong competition, which has deterred them from raising APRs too rapidly for fear of losing clients to competing firms. Consequently, buyers have been able to budget accurately for services. Nevertheless, because rates are expected to increase through 2020, buyers should seek out fixed-rate APRs whenever possible. Buyers can also pay down their existing credit card balances now to avoid higher interest expenses.

 



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