Why Visa Stock broke today

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What happened

On a bright bullish day for the stock market in general, stocks in the credit card giant Visa (NYSE: V) increased even more than most – almost three times the S&P 500, In reality. At the close of trading, Visa shares had gained 4.3%.

You can thank The Wall Street Journal for that.

Image source: Getty Images.

So what

In a front-page article in the business and finance section of Thursday’s newspaper, the Newspaper reported that “credit card applications [a] pandemic high “in October. But while that was the headline, the subtitle of this story was even more astonishing. It turns out that” nearly 27% of US consumers said in October that they had requested a credit card in the past 12 months. “

One in 4 Americans just applied for a new credit card? Do you think this could be good news for Visa’s business? Because I think it could be.

Now what

It’s worth noting that this good news for Visa may not necessarily be as good for all the banks Visa does business with. As the Newspaper points out that banks charge interest on balances carried over from month to month, but while consumers seem eager to shop with credit cards, the government’s multiple stimulus payments have left them with plentiful cash , so they don’t necessarily need to carry a balance these days (and pay interest on that balance).

Result: “Credit card balances remain $ 123 billion lower than they were at the end of 2019.”

This is actually bad news for banks, which bear all the costs of extending credit, but are not making all the profits they would like, in the form of interest payments on credit card debt. credit. However, it is not a problem for Visa, which charges its transaction fees of 1.3% to 2.5% on every sale made using its cards, that that sale ends up generating interest for them. banks or not.

Simply put: more cards means more money for Visa, and that’s why the stock has gone up today.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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