According to credit bureau firm TransUnion, over 14 million new credit card accounts were opened in the United States in the last quarter of 2014 alone. This represents an increase of more than 7% from the same quarter of the previous year. Average credit card balance per borrower and the delinquency rate both decreased slightly. As of the first quarter of 2015, there were approximately 360 million credit card accounts in this country.
The number of sub-prime and near-prime customers is now increasing at a faster rate than for prime credit card customers. (“Subprime” is defined as a customer having a “VantageScore” credit rating of 600 or less, “near-prime” as between 601 and 660, and “prime” as over 660.) Sub-prime customers originations accounted for over 16% of card originations in the fourth quarter of 2014 compared with 13% in the fourth quarter of 2013, an increase of over 26%. Although the number of account originations is growing faster, the total dollar amount of available credit card lines for subprime and near-prime remained at slightly over 9% of the total for all card holders. This reflects a decrease in the average available credit within such groups.
So-called “derogatory” or negative credit items tend to disappear from a borrower’s credit report after seven years, meaning that many of the charge-offs from the last financial crisis are finally starting to go away. Banks will increasingly be signing up these customers whose credit scores are now enjoying this benefit. Because of the profit margins on credit cards, these lenders will probably also continue to expand to those with lower credit scores.