The credit crisis has been focused on large corporations and housing and has not made its way to the consumer directly. If the consumer is the next victim of the credit crunch it could have a crippling affect on spending, confidence and the U.S. economy. This phenomenon spilling over to the consumer would be a drag on consumer credit companies and therefore we need to keep an eye on these stocks. (For more, read Who Is To Blame For The Subprime Crisis?)

Credit Services Stocks
American Express Company (NYSE:AXP) - Even though Warren Buffett owns a stake in the financial firm, it has not helped its performance in 2008. The stock is off 20% through late August and hit a 5-year low in July. Not only does American Express have the consumer credit issue (86 million credit cards worldwide), but they also own one of the largest travel agents worldwide. A credit crunch for the consumer will lead to less spending on travel and therefore AXP has the highest risk of a potential further drop.

Visa (NYSE:V) - With an astonishing 2 billion payment cards in circulation, Visa operates the world's largest consumer payment system. Both company's ability to weather the economic downturn has been seen in the price of the stock during the credit crunch. After going public in March 2008, Visa has held up much better than American Express and competitor MasterCard. Visa is up 22% since April 1, 2008 and American Express is down 9%.

MasterCard (NYSE:MA) - Number two behind Visa, Mastercard does not issue credit cards. The company markets its namesake on debit and credit cards and collects fees on the transactions. Even though MA would be hurt by a consumer slowdown and a tightening of lending standards, the stock should hold up better than American Express, which carries more risk. From a technical perspective, the stock has been holding up well in August as it sits above its support area at $225 per share.

Discover Financial Services (NYSE:DFS) - There are about 50 million Discover cards in the world in which holders are paid back when they make purchases. The company issues credit cards and processes the transactions when the card is swiped. They own the PULSE network of ATMs. The stock has held its own in 2008, but of the four DFS does not qualify as a top pick.

The Good and the Bad
In the end it comes down to the credit companies either loosening their lending standards as they continue to issue cards to consumers or they slow the amount of issuances and their loan portfolio decreases. Either way there is added risk to the consumer credit companies going forward as long as the lending standards remain tight for the other areas of the economy. When things get better, this will be one of the biggest beneficiaries as lending standards will be more lax and spending by consumer's will increase.

Find out how you can get out of credit card debt in Expert Tips For Cutting Credit Card Debt and A Lifeline For Those Drowning In Debt.

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