The biggest credit card growth segment for both bank- and retail-issued cards is among subprime borrowers, those with credit scores of 660 or lower, according to Equifax, one of the three major credit bureaus.
New credit card accounts for consumers with subprime credit scores have shot up 40 percent so far this year, compared to last year, says Amy Crews Cutts, Senior Vice President and Chief Economist at Equifax.
“As the economy improves, consumers appear to be ready to expand, or in some cases, rebuild their credit,” said Cutts. “… This reflects both consumers’ appetite for new credit, and lenders’ willingness to offer it.
“Interestingly, balances for both subprime and prime have risen very little, suggesting that while consumers are positioning themselves for growth – they are also hesitant to take on new debt.”
Overall, credit card balances on bank-issued cards are reaching new post-crisis highs. The total bank card balances outstanding in September 2014 was$557.7 billion, the highest total in 44 months, Equifax says.
Available credit, which is the difference between the total credit limit and balances, in September 2014 was more than $2 Trillion for the first time since March of 2009.
Brad Jones, Retail Banking Leader for Equifax, stated, “As consumers continue to become less credit averse, financial institutions are in a different position than in the past 5-6 years. Those organizations that use best-in-class data to gain a true understanding of consumer trajectory will not only know where a customer is, but where they are headed, for more informed decisioning and targeting.”
According to Equifax, here are year-over-year increases in new credit originated for subprime borrowers as of year-to-date in July:
- Bank-issued credit card limits: 43.5% ($8.83 billion to $12.68 billion, a six-year high);
- Bank-issued credit cards: 42.9% (6.88 million to 9.84 million, a six-year high);
- Retail-issued credit card limits: 16.2% ($5.91 billion to $6.87 billion, an eight-year high);
- Retail-issued credit cards: 12.8% (6.9 million to 7.8 million, an eight-year high).