THE UK CREDIT CARD MARKET

The credit card market in the UK has attracted interest over recent
months, partly because of the strong growth it has enjoyed and also
because of the aggressive behaviour of a number of new entrants. This
article looks at the market and compares some of its characteristics with
those of the credit card market in the United States.

The credit card market is unusual,
so any analysis requires an understanding
of the mechanics behind
the product and the market. The first
part of this article outlines some of
the key sources of income and costs
faced by card issuers and how these
influence the net interest margin of
the product. The next section
considers the recent growth in the
UK card market. Observers have
commented on the similarity between
the UK market now and the US
market 10 years ago, so this section
also concentrates on some recent
developments in the US market.
Then some of the similarities and
differences between the UK and US
card markets are examined, which
may indicate whether the UK will
follow the US trend and issues that
may arise if it does so.