Back to our old tricks? Credit card issuance hits 3-year high

NEW YORK (CNNMoney) -- Even though consumer confidence continues to tumble, household debt remains near record highs and economists are warning of another recession, the issuance of new credit cards is soaring -- especially to the riskiest of borrowers.

Sound familiar?

The total number of bank cards, or credit cards issued by banks, jumped 27% in May compared to a year earlier, according to credit reporting bureau Equifax. From January and May, nearly 15 million new bank cards were issued -- the highest level in three years.

The number of cards banks issued to subprime borrowers, meaning consumers with tarnished credit histories who present a greater credit risk, rose a whopping 65% during the first five months of the year, to 4.4 million cards. During the same period in 2009, the number of cards issued to these risky borrowers tumbled 63% year-over-year.

Limits on credit cards have also increased, Equifax found. Overall credit limits rose more than 27% from January to May, and new subprime bank card credit limits soared 68%.

Credit card issuers tightened their lending standards significantly during the recession, cutting credit limits on many accounts. And, in many ways, the big jump in credit limits can be seen as a sign that issuers are starting to loosen the reins on lending again, explained Bill Hardekopf, CEO of credit card comparison site

And given the economic news in the past few weeks, which have sparked huge drops in the stock market, this upward trend in issuance could take a U-turn as banks become less willing to take a chance on riskier borrowers, said Hardekopf.

Student Loans Escape Blog

"[Issuers] have been dipping their toe in the water more this year, and up until two weeks ago, they felt pretty good about how things were going," said Hardekopf, who noted that defaults and delinquencies are down and credit card debt is starting to rise after dropping for 27 straight months.

The total number of bank cards issued between January to May of this year is only half of the 28.5 million bank cards issued in that same time period in 2007, before the recession hit.

"Banks vary their approval rates and who they go after based on how good the economic news is, so it will be interesting to see what ramifications this latest economic news has on their issuance efforts." 

0 Comments + Add Comment

Leave a comment