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TransUnion says credit card originations will rebound in 2021

But issuers might offer smaller credit lines due to decreased consumer spending


After credit card originations dropped during COVID-19, TransUnion expects a big comeback for 2021.

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The pandemic caused a significant slowdown in credit card lending between the first and second quarters of 2020.

But card originations and personal loans will pick up during the first half of 2021, particularly in Q2, according to TransUnion’s 2021 consumer credit forecast.

TransUnion expects credit card originations to go from 15.52 million in Q1 2020 to 12.5 million in Q1 2021 (a -19.3% year-over-year change) and from 8.59 million in Q2 2020 to 14.13 million in Q2 2021 (a 64.5% year-over-year change).

“Origination activity in the credit card market is expected to return to pre-COVID levels in 2021 with growth occurring across all risk tiers,” Paul Siegfried, senior vice president and TransUnion’s credit card line of business leader, said in a news release.

In addition, he said, things such as pandemic lockdowns, unemployment and continued uncertainty in the sector will likely cause issuers to take a measured approach to lending.

“We expect this to happen in the form of smaller credit lines to account for a decrease in consumer spending, Siegfried said. “With balance growth remaining muted for the foreseeable future, delinquency levels will continue to improve and stay well below post-recessionary levels.”

See related: Credit card spending rebounds from pandemic plunge

Struggling homeowners could affect credit card market

Mortgage borrowers – in particular those still in accommodation programs at the beginning of the year – will affect how quickly credit card originations will take place in 2021.

According to TransUnion’s data (which runs through October 2020), 84% of mortgage borrowers’ accounts that went into accommodation status since March 2020 are no longer in forbearance.

Accounts that are still in forbearance are largely mortgages (5.4%), with auto, credit card and personal loans following at less than 4% of total account volume.

In addition, those with mortgages in forbearance carry more credit products, which might affect delinquency rates going forward.

“Serious consumer delinquency rates have remained low in 2020 primarily because of the accommodation programs provided to consumers at the onset of the COVID-19 pandemic,” Komos said. “However, we believe those consumers with accounts still in mortgage forbearance also may be the ones who will find it most difficult to make their monthly payments once accommodation programs end.”

However, Kosmos said TransUnion’s 2021 projections point toward a year that will be more like 2019 than 2020’s COVID-19-impacted consumer credit market.

See related: What to do if your credit card is closed due to delinquency

Credit access will be strongest for those with high scores

Ted Rossman, industry analyst for, predicted more new credit card accounts would be opened in 2021 than in 2020, but lenders will remain cautious, especially in the first half of 2021.

That will mean higher credit standards and lower credit limits, he explained.

Access to credit will be strongest for applicants with credit scores in the mid-700s and higher along with steady incomes, Rossman predicted. That’s a change from a year ago when a consumer could qualify for most credit cards with a score in the upper 600s.

Rossman believes travel will be a big theme in the credit card world in 2021 and expressed hope for a widespread COVID vaccine available by Q2 or Q3. This would end most of the economic pain and uncertainty and unleash a flood of pent-up travel demand.

“Credit card companies rely heavily on travel spending, and once travel starts to bounce back, we should see a lot of travel-related credit card sign-up bonuses and spending incentives,” Rossman said.

See related: 5 tips on how to safely travel during the coronavirus outbreak

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