The amount of new credit cards issued during the first eight months of the year grew significantly during the first eight months of the year, and overall consumer debt is now approaching pre-recession levels.
Consumers may be more comfortable using credit cards and dealing with debt these days, according to new statistics from the latest National Credit Trends Report from the credit monitoring bureau Equifax. Consumers increased the amount of new credit cards they opened with banks between January and August by 25 percent over last year’s amount, with a total of 25.3 million new cards issued. That’s compared with just 20.2 million opened in the same period last year. Meanwhile, there were 21 million new retail credit cards issued between January and August, compared with 19.7 million in the same eight months in 2010.
One area on which lenders seem to be focusing in particular these days is subprime borrowers, whose credit scores are less than 600, the report said. The number of new accounts issued to these consumers expanded 56 percent over last year’s January through August totals, indicating that lenders are once again slackening credit standards as the effects of the recession continue to recede.
Meanwhile, the amount of money consumers saw issued for all types of consumer credit – such as auto loans, student loans, credit cards and home equity – still lagged behind pre-recession levels significantly, the report said. The 25.3 million new accounts had a combined total of $514 billion in credit, which is considerably lower than the January through August, 2006, total of $942 billion.
“On the whole, the lending industry is experiencing dramatically mixed results depending on sector,” said Michael Koukounas, senior vice president of special client services for Equifax. “Bank credit card and auto lending, in particular, have consistently performed strongly this year, providing some ground for optimism, but the severe retraction within home equity lending continues to underscore the level of impact that declining home values are having on the economy.”
Consumers in general are clearly feeling better about their financial situations and are therefore borrowing more on their credit cards accordingly. That trend is expected to continue in the coming months as a result of the usual seasonal growth in borrowing seen every year around the holiday shopping season.