| January 10, 2012

Consumers’ credit card use a boon to lenders

The lingering effects of the recession and the burgeoning consumer optimism that the national economy is now recovering has combined to boost profits for both credit card lenders and payment processors, as consumers are once again becoming more comfortable taking on credit card debt.

Credit card use is on the rise, consumers are carrying more debt, lenders are sending out more offers for new accounts and delinquencies are still at an ebb, all of which has spelled growing profits for the nation’s top lenders and payment processors alike, according to a report from the Wall Street Journal.

As the economy continues to improve, consumers are once again turning to their credit cards to cover spending of all types, and lenders have seen profits rise considerably as a result, the report said. This is also helped considerably by the record-low levels of both charge offs and early-stage delinquencies, which experts predict should bottom out soon and start returning to all-time averages. But until that time, it is expected that lenders will still benefit.

These two factors have also combined to convince many lenders to once again begin broadening their credit requirements after having tightened them considerably during and immediately following the recession, the report said. As a consequence, consumers who may have wanted to use credit cards in the past but were unable to do so as a result of lower credit ratings once again have access to this type of account. In fact, lenders have considerably stepped up even the offering of new accounts to subprime borrowers who would have never been able to obtain such an account just a year ago.

Another group that may be doing more spending on their credit cards these days are more affluent Americans who never really stopped using these accounts, the report said. That’s because while competition for subprime and prime borrowers has been ramping up in recent months, the amount of high-value offers being extended to those with the best credit ratings by most major lenders has also increased considerably.

During the recession, many consumers shied away from using their credit cards as other financial struggles, and many who did also made more conscientious efforts to start paying off their outstanding debts as well. However, recent statistics suggest many are now returning to credit card use and carrying larger balances.

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