Consumers applied for credit cards at a record rate in a June survey, according to the Federal Reserve Bank of New York
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Credit card applications rose to a new high in a June survey, while rejection rates declined, the Federal Reserve Bank of New York announced last week.
Thirty-one percent of consumers surveyed in June said they had applied for a credit card in the past year, according to the N.Y. Fed’s Survey of Consumer Expectations. That was up from 28.5 percent in February, the previous time the question was asked.
The rate of card applications by consumers in the June survey was the highest recorded since the series began in 2013.
“That fits with what we see happening in the consumer sector as a whole,” said Richard Moody, chief economist for Regions Bank in Birmingham, Alabama. “There’s been continuing job and income growth” to support more consumer credit.
The look at applications comes as other Fed data show that balances on credit cards are approaching previous records as well. Revolving credit balances – chiefly credit card debt – climbed $2.3 billion to $953.3 billion in May, marking the 11th monthly increase seen during the past 12 months. Balances hit their historical high water mark of more than $1 trillion in 2008.
People with fair to poor credit have the largest appetite for credit cards, the survey showed. Of people who had applied for a card, 37 percent had a credit score less than 680, and 35 percent had a score between 680 and 760. People with high credit scores over 760 made up the remainder of applicants.
“The drop in rejection rates was observed for all credit types except housing-related debt applications,” the New York Fed said in a statement accompanying the data release. Rejection rates for all types of credit tracked reached a record low for the series.
Only 5 percent of respondents reported holding off on applying for credit of any sort because of the likelihood of rejection, about the same rate of discouraged consumers as the previous survey.
The monthly Survey of Consumer Expectations includes questions about people’s experiences in the credit market every four months, in February, June and October. The look at the credit market began in October 2013, including data on home and auto loans as well as credit cards.
Consumers’ appetite for credit cards doesn’t show much sign of tapering off. Eleven percent said it’s likely they’ll apply for a card in the next 12 months, about the same as in February.
Is there a danger consumers will get overextended?
“I don’t know we’re at that point yet,” Moody said. Card balances have been growing fairly slowly, and the economy still has room to improve as many people remain unable to find full-time work.
“I don’t think anyone’s going to lose control – memories of the last downturn are fairly fresh,” he said. Lenders are remaining cautious with underwriting with an eye to borrowers’ income and ability to carry monthly payments.
In other results from the survey:
- 12 percent requested an increase in their credit limit, down from 15 percent in February. Sixteen percent who sought an increase in the past year reported being rejected, down from 22 percent.
- Consumers put their chance of being rejected for a future card application at 28 percent, on average, the same level of pessimism as in February’s survey.
- 14 percent of respondents said they had closed at least one account of all types voluntarily in the past year, about the same as in February.
See related:Fed: Credit card rejections plunge