U.S. lenders issued more credit cards than ever last year, with a growing share going to consumers with lower credit scores.
A record 196 million Americans held cards at the end of 2021, according to a report by credit data agency TransUnion.
In the third quarter, the last for which detailed figures are available, the number of new cards issued hit a record high of 20.1 million, he said.
Some 9 million of these went to so-called unpreferred borrowers – those with poor or fair credit.
The surge shows how eager growth-seeking lenders are to tap into consumers who were largely able to meet their obligations even after pandemic stimulus packages ended last year.
Credit card issuers are ramping up marketing campaigns and competing to attract customers.
Interest rates charged on cards hit long-running highs last year relative to risk-free rates on Treasury debt.
Capital One Financial Corp., primarily a card lender, spent nearly $1 billion on marketing in the October-December period, double the amount spent in the first quarter.
“I’m struck by how well the consumer is doing right now,” Capital One chief executive Richard Fairbank said in a Jan. 25 conference call. “We have a strong consumer,” he said, with “everyone sort of coming out of the pandemic.”
Consumers are still relatively cautious with their new cards. The average balance per borrower was little changed from a year earlier in the fourth quarter, at $5,127, and remained well below pre-pandemic levels, TransUnion said.
An unknown risk for issuers is that unless student loan repayments are again canceled or suspended, millions of Americans will have to meet those loan obligations in May when the forbearance period ends.
Student loan repayments, typically in the hundreds of dollars a month, will force many households to make budget decisions.
“For a portion of these consumers, this will mean less disposable income available for discretionary purchases, which could result in lower amounts being added to card balances each month,” said Charlie Wise, senior vice president of research and marketing. advice at TransUnion, by e-mail. .