A new report from the Federal Reserve Bank of New York finds that the issuance of new credit cards has been expanding rapidly since 2009, throughout the post-recession and post-financial crisis period of the last seven years.
But most telling is that the nation’s lowest-scoring borrowers — those with credit scores under 660 — are getting new credit cards at such an increasing rate that they are approaching pre-crisis levels.
This group of “subprime” borrowers was more severely affected during the Great Recession, with their access to new credit highly restricted and their card accounts at the time closed both voluntarily and involuntarily.
“Nearly half of all card closures in 2010 and 2011 belonged to borrowers with credit scores of 660 and below, although they comprise only 33 percent of card borrowers,” reports the New York Fed. “Reversing the sharp net decline in the number of credit cards during 2008-10, in recent years, the level of new card issuance to this group has been strong and is now approaching pre-recession levels.”
Additionally, the median limits on those new cards have increased, from $500 in 2009 to $1,000 in 2015 for the subprime borrowers.
“Over the same period, borrowers in the 720-779 and 780-plus credit score groups have seen their median new card credit limits increase from $3,600 and $4,200 to $5,500 and $8,000 respectively,” the study found.
Overall, the total outstanding U.S. credit card balance now stands at $729 billion as of the end of the second quarter, up $17 billion from the first quarter, but still well below the peak of $866 billion reached in the fourth quarter of 2008.