Credit Card Companies Ease Standards

by High Yield Savings Accounts

Banks took a softer view toward consumers seeking new credit cards in the first three months of the year, according to the Federal Reserve’s April 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices.

The survey, which addresses the market of loans for businesses and households during the first quarter of 2011, found that lending standards used by credit card companies had eased, which means it was easier for consumers to get approved for new plastic. Ironically, though, the demand for new credit cards has been lethargic.

The Survey

Every three months the Fed requests feedback from banking executives in order to zero in on changes in the supply and demand of loans to businesses and households during the previous quarter. The Fed’s April Survey included responses from 55 domestic banks, plus 22 U.S. branches and agencies of foreign banks. According to the survey, 20% of banks reported easing their approval standards for consumers seeking new credit cards in the first quarter of 2011.

This is a dramatic improvement from the fourth quarter of 2010, when less than 10 percent reported a loosening of credit standards.. Additionally, about 6% of banks lowered the minimum credit score needed to get approved for a card, while no bank reported increasing the required score. Although 9% of banks reported increasing interest rates on new or existing accounts, this was equal to the percentage of banks that decreased them.

Consumer Credit Card Demand

According to the survey, it seems consumer demand has not increased along with the easing of credit approval standards, at least the demand for new plastic. On net, banks reported little change in credit card loans. However, when asked about new credit card accounts and credit increases for existing accounts, banks reported the demand rose by 16%. While only a net fraction of banks reported an increase in the number of credit card applications in the first quarter, it seems consumers are looking for higher credit limits on existing cards rather than opting for new ones.

The Good News

The good news for consumers is that this is a good time to shop around and check out various credit card offers with one in three major banks reporting an easing of credit standards. However, part of the reason the number of consumers seeking new credit cards has not increased might be due to the fact that companies are targeting low-risk borrowers, or people who are in a better overall financial position. Yet these consumers probably already have multiple cards and are not necessarily looking to add to their collection.


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