In the years immediately following the 2008 recession, lenders, including credit card companies, made it more difficult for Americans to get credit-based products. Economists are expressing concern that this trend seems to be reversing itself.
More consumers are being granted credit cards, even if they don’t have the credit scores to warrant the credit they’re receiving. For some, this brings back concerns of the subprime mortgages that preceded the recession, where lenders were granting home loans to people who couldn’t afford them.
According to a recently published study by the Federal Reserve Bank of New York, people with lower credit scores (660 or less) are increasingly being given credit cards again, albeit with lower credit limits than people with higher credit scores. According to the report, “the level of new card issuance to this group has been strong and is now approaching pre-recession levels.”
The researchers concluded, “Although new cards are disproportionately issued to lower credit score borrowers, the overall extension of new credit, measured by increases in aggregate credit limits, continues to go overwhelmingly to those with credit scores above 720.”
Many of those credit card offers that arrive in the mail can seem very tempting. They often try to lure people with promises of a low interest rate that they can use to pay off higher-interest cards. However, it’s essential to read the fine print to determine just what kind of interest rate and fees you’ll be paying if you don’t pay your balance in full and on time each month.
Many people who get into serious credit card debt are paying interest that’s accumulated on their accounts more than paying down the balance. If you find yourself overwhelmed by credit card debt that you can’t seem to get out from under, an experienced Arizona bankruptcy attorney can help you sort through your options.
Source: Business Insider, “America’s worst borrowers are grabbing credit cards like it’s 2006,” Matt Turner, Aug. 09, 2016