As banks continue to push cards and borrowers become more comfortable with carrying debt, the levels of outstanding credit card balances are on track to reach $1 trillion this year.
The Wall Street Journal reported late last week that the amount of debt consumers are expected to rack up this year may come close to the all-time highest amount of $1.02 trillion, set back in July 2008.
The surge has reportedly been driven by a continued increase in economic conditions, coupled with an improving job market. Both of which may be making consumers less wary about the idea of taking on more credit card debt.
As consumers continue to push their credit card debt to the brink, banks are ready and willing to capitalize on changes in perspective by raising card limits, while distributing more cards with even more perks.
“We’ll continue to take this opportunity as far as it will take us,” Richard Fairbank, Capital One Financial CEO, reportedly stated during a conference call with investors recently.
According to WSJ, credit card sales at Capital One have surged by 14 percent in its first quarter compared to a year earlier, showing that the banks’ strategies to increase usage are working. Capital One has worked to give out more cards and increase spending limits; the result has been that its customers spent 20 percent more on their cards during the first three months of 2016 versus last year.
Data from Equifax shows that lenders distributed more than 104 million general purpose and store credit cards in 2015, representing a 6.5 percent jump from a year earlier and a 47 percent hike from 2010.
Wayne Best, chief economist at Visa, told WSJ that many issuers are even expanding the range of credit scores deemed acceptable for prospective borrowers, including “some of the areas that have not been as fully explored or serviced before, such as near-prime and subprime.”
“Credit cards are the best business in banking,” said Robert Hammer, who runs the credit card consulting firm R.K. Hammer, which found that, for big lenders, credit card returns on assets are expected to hit 4.25 percent to 4.50 percent this year, showing a marked increase in profitability.