Research and Statistics

Fed: banks loosen credit limts


Banks aren’t rushing to grant more credit cards to new applicants, but they are being more generous about expanding credit limits

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Banks aren’t rushing to grant more credit cards to new applicants, but they are being more generous about expanding credit limits on cards, according to the Federal Reserve’s latest survey of senior loan officers.

The quarterly survey found that nine of them (18 percent) “eased somewhat” their terms and conditions for credit limits on new or existing consumer credit cards in the previous three months.

But as for new customers, the welcome mat was not exactly out. When it came to applications for new cards, only 7 percent of bankers said that they “eased somewhat” their credit standards in the past three months. Just 2 percent of bankers said they “tightened somewhat.”

The survey includes responses of senior loan officers from 73 domestic banks and 22 U.S.  representatives of foreign banks.

A somewhat uneven recovery helps explain the difference between tight new loans and looser credit limits, said Mark Vintner, managing director and senior economist at Wells Fargo. The stock market and real estate recovery have helped upper-income households more than middle-income tiers.

“After the (economic) cycle we’ve been through, when you look at what’s happened to the American consumer, with sluggish income growth, it makes it tough to be too aggressive in an overall sense,” he said. “But at the upper end, there is capacity to take on more debt.”

The latest word from bankers continues the trend found in the Fed’s previous survey in August. Then too, it was easier for consumers to expand credit lines than to get a new one.

“It’s good to see limits are going up, even if just for some households,” Vitner said. “We’re still a long way from getting back to normal.”

Demand for credit cards seems to be outpacing the willingness to grant them, but the demand-side picture is mixed. In the October survey, 18 percent of bankers said consumers’ appetite for cards, other than normal seasonal variation, was “moderately stronger” than the previous three months. However, another 10 percent said demand was “moderately weaker.”

Bankers reported they also loosened their grip slightly for other forms of consumer credit. Thirteen percent said they were “somewhat more willing” to make consumer installment loans, while 12 percent said their standards “eased somewhat” for new and used auto loans. The loan term for autos is also going up, as 11 percent of bankers said they “eased somewhat” the maximum maturity for auto loans, while 8 percent said they eased their minimum down payment requirement.

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