According to a new report by the New York Federal Reserve, more Americans are seeking new credit than at any point since the beginning of the pandemic. The dramatic rise in new applications is a stark contrast from the hunkering down and fiscal belt-tightening of late 2019 and all of 2020. Here are the full findings from the N.Y. Federal Reserve:
New York Fed: Consumers Applying for Credit Cards in Record Numbers
American consumers are applying for new credit at a rate not seen since before the coronavirus pandemic. New data from the New York Federal Reserve shows that approximately 27% of U.S. consumers said in October that they had applied for a new credit card in the past 12 months – the highest level since 2019.
The COVID-19 pandemic saw a sharp decline in the number of consumers seeking new credit, with Americans instead of focusing on consolidating their debts and spending within their means. At the same point last year (October 2020), only 16% of consumers had stated they applied for new credit cards – a record low for the N.Y. Fed.
Not only are Americans applying for new credit cards, but they are also seeking credit limit increases on existing cards. The Fed data shows that more than 11% of U.S. consumers said in October that they had applied for credit-limit increases in the past 12 months, up from about 7% a year ago.
“Expect Demand to Come Back to Pre-Pandemic Levels”
“Many things are slowly returning to more normal times,” said Wilbert van der Klaauw, senior vice president at the New York Fed, in a statement to the Wall Street Journal. “With that, you expect the demand for credit to come back to pre-pandemic levels and continue on the same growth path.”
Increased demand, however, doesn’t necessarily mean big profits for credit card lenders. Data from the N.Y. Fed shows that while more and more Americans are applying for new cards, they are also paying off balances more quickly than they did before the pandemic. As a result, issuers need to approve additional credit lines in an attempt to pad their bottom lines.
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