Fewer Americans are defaulting on their credit card bills. That’s good news for our budgets and credit scores, but the improvement is also making credit card issuers happy. Fewer charge-offs means they’re in a better position to pitch more credit cards, so consumers can look forward to a mailbox full of applications in the new year. Credit card defaults hit a high of 10.4% in 2010 but have since dropped to half of that, and an Associated Press article cites a Moody’s analyst who predicts the number of charge-offs will drop to 4% by next year. With their balance sheets in better shape, credit card companies are going to be looking for new customers. Issuers have spent the last two years competing fiercely for consumers with top-notch credit, even as they’ve slashed credit limits or closed the accounts of customers with lower credit scores.
Now, they want some of those customers back. “TransUnion … said last month that about a quarter-million new cards were issued in June to September to consumers who had had some trouble making payments in the past, as indicated by their moderate credit scores,” the AP says.
Giving people better access to credit will definitely help some consumers, but that increased ability to borrow is a double-edged sword, especially for those who have had trouble paying in the past. The good news is that credit card company data shows that many of us are being more responsible with our use of credit; in its most recent quarterly earnings announcement, Discover Financial Services reports an increase in customers paying in full each month rather than revolving a balance.
If you’re in the market for a new credit card, though, credit experts tend to recommend shopping around online rather than just filling out an application that comes in the mail. You might find a better APR, rewards or promotions if you do a little digging. Perks like a 0% APR teaser rate or a cashback bonus for new customers are popular incentives, and issuers are constantly shuffling their offerings.
Make sure to find out what kind of credit you need to qualify for a particular card before applying, though. The slight hit your credit score takes from the inquiry into your credit file the company initiates is eventually offset by the new credit you’re given; if you’re rejected, you get dinged with nothing to mitigate it.