Banks Still Not Easing Credit Card Standards

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On a day when the U.S. Labor Department says that the economy created zero jobs in the month of August, fresh data from the Federal Reserve suggests that one key component of U.S. gross domestic product growth — the vaunted U.S. credit card consumer – has taken his and her plastic and called it a day.

The Fed’s latest Senior Loan Officer Opinion Survey on Bank Lending Practices report concludes that consumers are hunkering down and spending less, with credit card late payments and card default rates in steady decline. The quarterly survey tracks credit card activity at 55 U.S. banks and 22 foreign banks (including U.S. bank branches).

That may sound good. But if you want the recovery to pick up, it’s actually the opposite. Less spending, even on credit, equals less growth and fewer jobs. What’s more, the Fed notes that banks are doing little to turn around the decline in credit card use. According to the Federal Reserve, less than 11 percent of U.S. banks surveyed report that they have eased credit card lending standards.

Here are more revealing stats from the survey:

  • Just 18 percent of large banks (and 10.8 percent of all banks) say their credit card lending standards have “eased somewhat.”
  • Zero percent of all banks report their card lending standards “easing considerably.”
  • Seventy-eight percent of all banks and 63.6 percent of big banks say their credit card approval standards have remained “unchanged.”
  • The minimum required credit score has “eased somewhat,” according to 22.7 percent of large banks and 13.5 percent of all banks. Again, zero banks report their minimum credit score standards “easing considerably.”

Increasingly, one thing that credit card borrowers and lenders can agree on is this – they really want to avoid additional debt.

In an ironic twist, and a significant break from pre-recession days, the financial behavior of both parties is increasing the chances of that happening. But considering that consumers comprise 70 percent of U.S. GDP, that’s possibly to the detriment of the U.S. economy.