High-Yield Savings Accounts: An Efficient Way to Fund Credit Card Loans

Credit card lending requires funding, and banks with credit card programs find themselves at an interesting point: The prime rate is at its highest level in decades, and in anticipation of decreasing rates in late 2024 and 2025, banks might want to engineer a more efficient loan funding strategy. One such method is to offer high-yield savings accounts to attract deposits for the credit card business, a strategy that helps improved liquidity, reduces reliance on external sources, and creates a more efficient business model. 

This Javelin Strategy & Research report details how plans to offer high-yield savings require attention from a broad contingent within a bank. How the organization is constructed may affect multiple entities within the institution or fall under the retail bank. Decisions must be made on how to enter the market, how to attract deposits, and whether the deposits will be managed under the same core system or a separate platform.

Key questions discussed in this report:

• How are credit cards funded? 
• What are some lenders doing to increase their net interest income? 
• How can issuers prepare for a decrease in the prime rate?

Companies Mentioned:

American Express, Barclays, Capital One, Citi, Chase, Customers Bank, Discover, HSBC, Marine Midland, Mastercard, Marcus, Synchrony, Visa