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Sector Snap: Payments remain strong despite taxes

The Associated Press

Credit card networks remain buoyant despite concerns that a tax increase on working Americans would reduce spending on cards this year.

The companies were mixed in afternoon trading Tuesday, but remained near 52-week highs.

Spending growth accelerated in January on a year-over-year basis, according to a report from First Data described in a note by Citi analysts. First Data is one of the biggest processors of payments for retailers and others that accept cards — a category of company known as merchant acquirers.

Total dollars processed on credit and debit cards rose 6.2 percent in January, compared with 4 percent growth in December, the note says. Credit card growth rose 9.2 percent, versus 4.3 percent a month earlier; debit transactions requiring a signature rose 4.3 percent from 3.4 percent in December.

The size of transactions increased nearly a percentage point.

"First Data noted that retail tickets saw their highest growth in over a year and that shoppers showed an increased propensity to spend more," the Citi analysts said. The analysts said First Data noted no negative impact in January from the payroll tax hike, but warned that the impact could be felt in the coming months.

As part of a deal to avert broader automatic tax increases, lawmakers last month agreed to keep lower income tax rates for most Americans.

But the deal resulted in higher Social Security payroll taxes, which last month began shrinking most workers' take-home pay. A person earning $50,000 a year will have about $1,000 less to spend in 2013. A household with two high-paid workers will have up to $4,500 less.

Economists feared that spending would suffer. However, the First Data report suggests that payments companies remain relatively insulated, in part because of the longer-term move toward more electronic payments.

"We continue to like the card stocks broadly speaking and the First Data metrics are a modest positive in our view," the Citi analysts said.

Mastercard fell $1.30 to $519.55. It hit a 52-week high of $535.35 on Jan. 31.

Visa rose 58 cents to $156.91. It hit a 52-week high of $162.77 on Jan. 10.

American Express Co. rose 32 cents to $62.30 after hitting a 52-week high of $62.56 earlier in the session, and has gained 8.5 percent so far this year.