Credit limits for subprime consumers are down from a year ago
While card issuers have raised credit limits for new prime and super-prime accounts significantly over the past year, they’re still keeping a low ceiling on credit limits on new subprime accounts, the American Bankers Association finds.Card issuers aren’t shunning the subprime crowd. In fact, the number of new subprime accounts opened in 2015’s third quarter was up 30 percent over the previous year. That’s almost double the 16.5 percent growth seen across all new account types.
Yet as lenders reach out to more subprime borrowers, they’re keeping credit limits tightly in check. True, the subprime credit limit for new cardholders is up 1.1 percent over the previous quarter – to an average of $2,356. But that average limit for all subprime accounts is down 0.1 percent from the previous quarter and down 0.2 percent over the year.
In contrast, the average credit limit offered to new prime card holders was $5,094, representing a 2.5 percent increase over the previous quarter. For super-prime, the average limit climbed 1.8 percent to $9,223.
Cautious subprime credit limits appear to indicate that while card issuers are willing to extend credit to borrowers with lower credit scores or a thin credit history, they are doing so with modest initial limits that may increase over time.
Released March 8, the March 2016 Credit Card Market Monitor is based on data from last year’s third quarter, collected by Argus Information and Advisory Services for the American Bankers Association. Risk categories are defined by Argus according to the following credit scores: subprime, under 680; prime 680-759; super-prime above 759.
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