Consumers not willing to overextend.
“New credit growth for bank-
and retail-issued cards is strongest among subprime borrowers,” according to a
recent Equifax press release.
Subprime borrowers are
defined as those with a risk score of 660 or lower.
“As the economy improves,
consumers appear to be ready to expand, or in some cases, rebuild their credit,”
says Senior Vice President and Chief Economist at Equifax, Amy Crews Cutts.
“New credit card accounts for
those consumers with a subprime credit score have shown more than a 40%
increase to date this year over the same time last year. This reflects consumers’ appetite for new
credit, and lenders’ willingness to offer it.”
Despite taking advantage of
available credit opportunities, consumers seem reluctant to overextend, “they
are hesitant to take on new debt,” as although new accounts grow, balances in
both the prime and subprime markets have grown very little, says Equifax.
Key takeaways from the report
regarding bank issued cards:
- Loans outstanding
are at the highest in five years, at more than 325 million;
- 28.8 million new
cards have been issued year-to-date in July.
This is up 21.3%.
- Balance of
available credit exceeds $2.56 trillion; a five-year high.
- Write offs as a “percentage
of total balances outstanding in September 2014” dropped 15.9% from the
previous year, at 3.48%.
- New credit limits
year-to-date July 2014 is 28.8 million, which is up 21.3% over the previous
year and a six-year high.
Retail-issued cards reveal
growth trends also:
- Loans outstanding
for September 2014 exceeds 195 million—the highest since January 2009.
- Total outstanding
balance is up 6.7% to $59.6 billion from the previous year.
- Newly issued
cards year-to-date July 2014 is 21.7 million, up 2.7% from the previous year--and a seven-year high.
- Write offs as a
percentage of all outstanding balances is 7.04%, down 3.5% from the previous
Meanwhile, all credit card
loans outstanding at credit unions are up 0.1% in September 2014, according to CUNA’s
Monthly Credit Union Estimates for
And, nationally, growth rates
of credit card balances at credit unions stand at 8.4% as of June 2014
(annualized), a steady increase since 2010 when growth rates were at 3.1%, 2011
with growth rates of 3.9%, 2012 at 5.7%, and 2013’s 7.7%, according to CUNA’s U.S. Credit Union Profile, Mid-Year 2014.
Subprime Auto Bubble?