Regardless of indicators that the U.S. economy is slowing, New York-based Citigroup is betting big on credit cards.
Citigroup, the third-largest U.S. card business, according to The Nilson Report, has been among the most aggressive promoters of zero-interest balance transfers.
For a small fee, users can move debt from a competing card onto Citi’s plastic and pay no interest for 21 months. That’s currently the longest 0% deal in the sector, in line with consumer finance firm Bankrate LLC.
The card enterprise now accounts for nearly one-third of Citigroup’s total income and is one of the biggest drivers of future earnings growth.
However, some experts and investors fear this portfolio may become a liability if the economy goes down. The bank continues to promote zero-interest offers on popular private finance websites and through mailers, while competitors have scaled back.
Credit card users who use balance transfers are considered higher risk since they often use easy financing to accumulate more debt, in line with bank analysts and credit score underwriters.
In interviews, Citigroup executives defended their card strategy and tight underwriting standards they say will shield the bank from significant losses in the event of a downturn.
Citigroup’s card business has posted delinquency rates far below the business average in recent times, based on federal data and filings. Besides, 83% of users in its American credit card enterprise, excluding its retail partnership cards, have credit scores of 680, which is considered an excellent rating, in accordance with credit rating agency Experian.