By forcing people across the nation into unemployment and shattering the profitability of individual companies and entire verticals, COVID-19 has sent the United States into an economic recession unlike any before. Consequently, credit card portfolio management has become more critical than ever.

To learn more about how COVID-19 has impacted the credit card space and what issuers can do to stay on track, PaymentsJournal sat down with Brian Riley, Director of the Credit Advisory Service at Mercator Advisory Group.

PaymentsJournalManaging Credit Portfolios Amid COVID-19 and Beyond PaymentsJournal Managing Credit Portfolios Amid COVID-19 and Beyond PaymentsJournaljQuery(document).ready(function ($){var settings_ap29149746 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"29149746",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_88820_2",settings_ap29149746); }catch(err){ console.warn("cannot init player", err); } });

COVID-19 brought a recession unlike any other

While recessions themselves are nothing new to economies—and are in fact a natural part of the economic cycle—the COVID-19 pandemic stands out because of its abrupt and unexpected nature. While there were indications of erosion and a potential recession prior to the Great Recession that began in 2008, that was not the case with the recession caused by COVID-19.

“With COVID-19, there was simply no anticipation whatsoever because it is an abrupt global public health issue,” explained Riley. Therefore, while a recession is a normal incident, this particular recession is abnormal because it came in a different form than any previous recession has.

For issuers, credit portfolio management is key

With credit use so closely tied to consumers’ household budgets, it has the tendency to ebb and flow as changes in the economy occur. Consumer spending has tapered off and creditors are sending out a record number of deferrals and payment holidays.

But consumers will still need credit on a long-term basis, making it important for issuers to manage their credit card portfolios in a way that takes the changing economic climate into consideration. By using a structured approach to evaluate and manage their credit portfolios, issuers can have the advantage of protecting their existing customer accounts and building downstream revenue.

A key portfolio component: Rewards

Credit rewards are a great example of what organizations can adjust within their portfolios to adapt to the changing economy. With the ongoing pandemic, travel rewards have lost their appeal as cardholders cancel trips and delay travel plans.

But while a trip to Hawaii may no longer be an aspirational benefit, cash rewards and cashbacks can provide an immediate benefit to the consumer in a way that meets their needs today. “The takeaway on rewards is that it is a living, breathing process that needs to be observed,” noted Riley. “It’s really important to understand where the mark...