Banks Are Making It Easier To Get Credit Cards (wsj.com) 83
Lenders are again welcoming borrowers with less-than-pristine credit, a vote of confidence in the health of the U.S. economy and Americans' finances. From a report: An estimated 29.2 million general-purpose credit cards were issued to people with credit scores of 660 and below last year, according to projections from credit-reporting firm TransUnion, up from 20.4 million in 2020 and 26.3 million in 2019. That is generally the threshold where lenders view consumers as having fair, rather than good, credit. Even subprime borrowers, a group shunned during the pandemic, are finding it easier to get credit. Lenders issued roughly 11.6 million general-purpose credit cards to people with credit scores below 620 during the first nine months of 2021, according to the latest data by Equifax, up 43.5% from a year earlier and the highest for the period on record. (Equifax's data goes back to 2010.) The aggregate spending limit on the cards rose 45% over the same period.
In the early months of the pandemic, lenders preparing for a tidal wave of missed payments tightened loan-approval standards, locking riskier borrowers out of the market for new credit. But government stimulus and expanded unemployment payments helped push down credit-card balances and kept defaults at bay. Some 33% of banks reported somewhat easing their credit standards for card approvals during the three months through early October, according to the latest Federal Reserve senior loan officer survey, compared with about 4% a year earlier. "The credit market is now more reminiscent of 2019 -- not the early stages of the pandemic," said Paul Siegfried, credit-card and payments business leader at TransUnion. "Despite the increase in new accounts to subprime borrowers, we have observed that balances for subprime borrowers have remained relatively stable -- a sign that consumers are not taking on too much risk."
In the early months of the pandemic, lenders preparing for a tidal wave of missed payments tightened loan-approval standards, locking riskier borrowers out of the market for new credit. But government stimulus and expanded unemployment payments helped push down credit-card balances and kept defaults at bay. Some 33% of banks reported somewhat easing their credit standards for card approvals during the three months through early October, according to the latest Federal Reserve senior loan officer survey, compared with about 4% a year earlier. "The credit market is now more reminiscent of 2019 -- not the early stages of the pandemic," said Paul Siegfried, credit-card and payments business leader at TransUnion. "Despite the increase in new accounts to subprime borrowers, we have observed that balances for subprime borrowers have remained relatively stable -- a sign that consumers are not taking on too much risk."
Less-than-pristine credit (Score:1)
So just a little ungood.
This is not a vote of confidence in the economy (Score:2, Insightful)
This is banksters being banksters. Because of the corona there'll be quite a bit of cash left unspent that otherwise would've gone to cafes and restaurants and such. If it's a vote of confidence, it's a vote of confidence in repo men.
Do notice that official interest rates are near zilch, and credit card rates... not so much.
So this is regular bankster preying on the less-than-responsible with money. Who should've noticed that if they have the cash anyway, paying cash instead of first getting into credit c
Re:This is not a vote of confidence in the economy (Score:4, Insightful)
If you have the cash anyway, it's cheaper to spend it on a credit card and then pay off the card every month. If you pay the card off monthly, you won't be paying any interest.
Many card issuers offer perks for using the cards, like cashback or airmiles which you wouldn't get using cash.
You also have greater convenience, not having to count out change or predict how much cash you need to carry etc.
Having a statement of all your spending is also convenient, and much easier to keep track of than cash.
Most cards offer protection against fraud, and against faulty purchases etc.
Cards are extremely useful if you use them responsibly.
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Cards are extremely useful if you use them responsibly.
"Useful" and "convenient" are two very different things, and you're conflating them. I think that's less-than-wise.
I get what you're trying to say: Credit cards are a tool. But a tricky one, and so not a good match to people with poor credit, therefore a poor track record of paying everything off on time.
And it's still better to keep track of spending yourself than relying on the "convenience" of some commercial company doing it for you... and making more use (and therefore money) of it than you ever can.
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How? Do you keep every receipt from every transaction and enter that into a spreadsheet? if you are not using credit card, then you are paying using Cash or Check or possible Debit card. Financial accounting using those instruments is not easier than using a Credit Card.
A credit card offers a layer of protection - you can challenge a purchase and get your money ba
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Not sure how that works in USA. In Poland (country in Europe) I have list of all my transactions automatically categorized available in my bank account mobile app or on bank's website.
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Even your cash transactions?
Sure your bank will keep a record of your credit card and debit card transactions but cash transactions are harder to keep track of (which was the OP's point).
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However there is Piss Poor Credit Card usage education that goes in American Society, where a lot of adults collect high credit card dept, and then pass off those habits to their children.
There has been a small handful amount of times where I put more on my credit card than I could have paid off for that month. I then paid off as much as I could before the payment was due, Then try damn hard to cut my spending for the next month So I can pay off the rest. However a lot of people budget their credit card i
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You're paying in privacy. If you won't have privacy in a cashless society, criminals won't either. And fundamentally, this will mean that things are easier to criminalize. Buh-bye freedom.
And yes, I'm coming out in favor of criminality.
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Most stores are full of CCTV, you don't really have any privacy in any case.
Bills all have serial numbers which can be tracked, unless you propose paying solely with coins. You can also leave traces of your DNA (or that of infectious viruses) on cash.
Most transactions are totally mundane so there's no need for privacy. I don't care who knows what i bought for lunch etc. For the few transactions where privacy is important - not all of which are illegal, there are various things you can do to cover your track
Re: This is not a vote of confidence in the econom (Score:2)
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Anything that makes it harder for the cops to do their jobs will be used as an excuse to push for higher budgets, which are subsequently funded by higher taxes.
The public gets screwed either way.
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> If you have the cash anyway, it's cheaper to spend it on a credit card
Get a cash-back card. If you're paying it off every month you're making money.
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I don't understand how getting credit cards could possibly be easier. The come pre-approved. My pet had a pre-approved credit card.
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This is banksters being banksters. Because of the corona there'll be quite a bit of cash left unspent that otherwise would've gone to cafes and restaurants and such.
This is pretty much it. The problem is people are using cash or at least debit cards instead of credit cards and credit is where all the money is. Just not the way you think.
If it's a vote of confidence, it's a vote of confidence in repo men.
Do notice that official interest rates are near zilch, and credit card rates... not so much.
Credit providers always lose on defaulters, thats why they'll go to the ends of the earth to prevent you from defaulting, even as far as forgiving thousands in debt. My stepfather had A$3,000 forgiven just so he didn't cancel his card (this was after he tried to cancel it because he didn't want to rack up more debt). Credit card compani
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It's the same as the housing crisis from 2006ish. Banks were allowing borrowers who quite frankly has absolutely no business getting a loan, to get a loan that they ultimately defaulted on because they were people who are not responsible and should have never been given a loan. Much like before, this is going to cause major issues and put irresponsible people deeper into debt. Credit cards are hard to manage and people who are not disciplined to pay off the balance either every month or as quickly as pos
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It wasn't just banks 'allowing' it, it was the fed pushing perverse incentives to make high risk loans. See https://www.wsj.com/articles/t... [wsj.com].
Now we have a new administration with the same financial policy roots: Do something that looks good on paper to minorities, but leave them stranded when they take on debts they can't afford. There's no doubt in my mind that the fed put together some 'incentives' to lenders to make this economy appear healthier than it actually is. So, the double gut-punch will be
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That was the go-to excuse for why the welfare mothers (oops, Banks) needed bigger welfare checks (oops, bailouts). Nobody in the Fed ever suggested that they should talk first time buyers into a McMansion rather than an adequate starter home and then rig a time bomb into the mortgage, but that's exactly what they did.
All that was actually suggested was to be more flexible about down payments and duration of the loan for people who would likely be able to pay it off one day.
Here, the banks are doing it again
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Credit cards are hard to manage and people who are not disciplined to pay off the balance either every month or as quickly as possible (in the case of a true emergency use) shouldn't have this luxury, it will only hurt them in the long run
What an elitist, paternalistic attitude.
"You can't handle credit to my liking, so you shouldn't have it".
How about letting people make their own fucking decisions, and benefit or suffer accordingly?
Fuck fascism.
Re: Less-than-pristine credit (Score:2)
Why the fuck should someone have to pay for a secured credit card just because you don't feel they should have a regular one?
Jezuz.
Banking is Nessary but Immoral (Score:2)
Banking in general is a good thing for society. Loans provide upfront payments for more expensive goods and services, which would allow us to invest into these purchases to acquire more wealth overall. For example get a Car Loan so you can get a car without having to spends years of your life saving up for it, in which you can use that Car to travel a better distance to work at a better paying job. Without access to say a Car Loan, I would have to work at a local establishment for a decade, before I get
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Car loans are generally a bad idea, you can take public transport its cheaper and better for the environment as well. Yes there are situations where it does make sense when its absolutely necessary for you job, e.g. plumber, traveling sales man. And yes you can always do some mental gymnastics to convince yourself that you NEED a car, but the truth for most people is it is not true, and the cost of owning it will be more than you save. Your options include, take public transport, car pool, buy a cheaper car
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What a bunch of bullshit.
Here's what my Monday looked like:
1). Drive to Costco 35 minutes away, to buy groceries.
2). While I was there, I decided to buy a desk. It was too big to fit in the car, so I left it there and drove 35 minutes home.
3). Got the other car, in which the desk WOULD fit, and drove 35 minutes back to Costco to get the desk.
4). Drove to the Aldi 5 minutes away.
5). Drove to the hobby shop 5 minutes from the Aldi (and the hobby shop is why I was out that way to begin with).
6). Drove 35 minu
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I ordered a chair for my desk. Office Depot shipped it to my house, for free too.
Seriously, how fucking stupid are you.
Re: Banking is Nessary but Immoral (Score:2)
Sure, I could order it from their website and pay an extra $50. Why the fuck would I?
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For a true comparison of costs, how much are you paying for your other car that the desk fit in, and how often do you use it?
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The temperature here has been hovering between -35 and -52 all week.
I can and sometimes do walk to the grocery store when the weather is good but it's about a 35 minute walk each way, and carrying a bunch of stuff that distance in this kind of cold will end up with everything frozen solid before I get it home. Fine if I'm buying ice cream, not so much if I'm buying potatoes or apples.
There is no public transportation in the town where I live other than a taxi service that's both overworked and expensive.
So
Hmm...this seems familiar (Score:2)
Re:Hmm...this seems familiar (Score:4, Insightful)
There weren't any consequences... for the banks.
It's about 100K (Score:2)
The reason they let you go that deep into debt is because they know they can g
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If your credit's good they'll let you take on about 100K in debt before they cut you off.
Well, that's certainly not true, based on personal experience. My current credit limit across all my cards is $216K. Nothing to stop me from charging them all up tomorrow, except my brain. FWIW, I don't carry a balance.
Hell, wife just got an $80K unsecured personal loan @ 6% (from SoFi). I've got $100K pre-approved offers for that loan right now. I have no doubt I could get one from several lendors @ once.
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They're playing the short-term,long-term game again, societal consequences be damned:
Short-term: Borrow cheap money from the Fed to lend to people at high interest rates. Profit.
Long-term: When the people can't pay their debts, claim Too Big To Fail and have the government bail them out. Profit.
Deja-vu (Score:2)
Personal debt up: check
Easy credit: check
Disappearing workforce: check
What could go wrong?
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Wealthy people collecting property from the poor who default on their debt: check
If you have money saved up now, wait. Once our next crisis happens (within the next 5 or so years) you'll either need that cash to wait out the next recession or use it to get rich and take advantage of the deals on property as people default on their loans again.
What could possibly go wrong? (Score:3)
What could possibly go wrong?
So did we learn anything from the past?
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yes, banks don't suffer the consequences of their bad decisions.
Have we learned nothing? (Score:1)
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"But government stimulus and expanded unemployment payments helped push down credit-card balances and kept defaults at bay."
You're welcome. -- The Taxpayers
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Credit Cards (Score:3)
Credit cards companies, shockingly, want you to be in debt to them.
Otherwise they are just payment processors, and there's almost no money in that at all.
Thus they offer you credit when they think you will need it, will be happy to pay interest on it, and when you can likely afford to keep paying payments and interest until they recover what they have lent you.
I don't think it's as simple as "The economy is good, therefore people will lend again." They lend most in the grey area - where people are uncertain, where people are liable to change, but to people who have a history of having paid back (and no-history is actually worse than a proven history of repayment in many cases).
They want you to be in debt to them. Not crippling debt such that you face bankruptcy - that's why they always negotiate and allow you to pay less if you're in trouble. Just enough debt that you have to pay a monthly payment, and don't feel afraid to take out another few hundred when you need it.
Sorry, but this just means that we've tipped over to the point where a credit card customer is a SOURCE of money again. Previously, people were being careful and not racking up debt because of the uncertainty. If people were flush, they'd be paying off their cards (e.g. with their stimulus cheque). Now we're in the middle ground where people aren't flush, but they are settled, and they now need money - which is the prime time to profit from them as a credit card company.
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Actually there's tremendous profit in being a payment processor. Think about it. As a CC company you get to skim a percentage on virtually all transactions in any direction, world-wide. It's quite a racket, in my opinion. If countries actually do manage to roll out digital cash that can be moved for free over great distances, just like handing someone a dollar bill, that has to be a huge threat to companies like Visa. I agree their greed knows no bounds and the the thought of lots of juicy juicy interest
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Granted, the article is about banks, not CC companies. It's true a bank that issues a Visa credit card doesn't make money off of me when I use it compared to people paying interest; Visa makes the money since they own the infrastructure. The big CC companies are definitely running a sweet, juicy racket, skimming off of every transaction world wide.
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Visa makes money off you every time you use the card.
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Correct, but in my GP comment I implied that banks make money on your Visa transactions, which isn't necessarily true.
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Correct, but in my GP comment I implied that banks make money on your Visa transactions, which isn't necessarily true.
Nope, that is 100% true.
The banks are slicing off a bit of the transaction the same as Visa/MC/AMEX are.
People in debt are a liability, banks never make back money that is defaulted on. No amount of repo can possibly recoup that, especially once bailiffs/courts become involved and people can plead hardship. A bank is more likely to forgive debt to prevent you from cutting up your credit card as they get a percentage of every transaction. The EU limited that to 1%... so you can imagine how much it is i
Re: Credit Cards (Score:2)
No, all parties involved in a credit transaction profit, they all get a cut.
For example, prepaid debit companies can exist on just their cut of each transaction. Well, fees also, but those are usually waived for (good) accounts with direct deposit, because those accounts can be depended on for more transaction volume. That's prepaid debit in a nutshell, fees for low volume accounts, no fees for higher volume because all the profit is in transactions through the payment network.
The card association (VISA e
Re: Credit Cards (Score:2)
Replying to myself, forgot something significant
Even you, the cardholder, take a cut from each transaction. If you have some kind of reward program with your card, then your bank or probably its processor technically, is sharing a cut of the transaction fees with you. Literally everyone involved takes a cut of every credit transaction that merchants pay for.
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American Express gets a 100% because they are the only card network that is also a card issuer. https://www.valuepenguin.com/w... [valuepenguin.com]
Credit Cards take a cut from every sale, even cash (Score:2)
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As far as I'm aware, those laws were eliminated some time ago in both the US and Canada. No idea about Europe. Companies can and do charge fees (itemized even) for credit cart transactions, although consumer retail stores don't usually charge differently. Some of my industrial suppliers charge me an extra 2% for payment with credit card. And that's not completely covering them. High-rewards cards often charge the retailer nearly 4%!
But yes, CC companies got a cushy deal for decades with their hidden tax
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They want to be payment processors. They charge 1%-3% for every single transaction; merchant fees and being a payments processor is exactly how they make money. Their ideal scenario is that peopl
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Credit card companies do NOT want you to be in debt to them. That's why for unsecured debt they charge such high interest rates, but 0 interest if you pay it off every month; they're attempting to incentivize you to use your card and pay it off every single month.
They want you to be just barely underwater. Not drowning, and not completely above water. It's the late payment fees and temporary interest that makes them the money - but you have to eventually pay it all for it to be profitable.
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The card issuer (e.g. your bank) wants you to carry a balance. They make money off of balances and service fees.
The credit card companies/payment networks (e.g. Visa, Mastercard and American Express) want you to make purchases since they get a percentage cut of every transaction.
It is the card issuers (since they are the once that actually issue the cards) that determine the criteria for who they will issue cards to. That is why the headline for this thread is "Banks are making it easier to get credit cards
Re: Credit Cards (Score:2)
Credit cards companies, shockingly, want you to be in debt to them.
Otherwise they are just payment processors, and there's almost no money in that at all.
This is not remotely true of the payments industry, payment networks just print money, without the risk of their money not being paid back, and it's a shitload of money.
Your bank does profit from your credit card debt, or you have to assume they do after covering the risk of non payment, but credit card companies such as Visa profit from transaction volume, and so do both of the banks at either ends of the transaction and other processors in the middle.
Your bank would be much happier if it only had wealthy
Vinnie the Nose (Score:3)
Of course banks are making it easier to get credit cards. They can borrow money from the Fed at 0% and lend it out to suckers at 20%. It's like printing money.
In the neighborhood where I grew up, there were guys who engaged in this kind of business practice and they all drove really nice cars. They made money off the vig and if you didn't pay, they'd break your legs. The banks don't even have to do that much work, because the courts will do the leg-breaking for them.
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They can borrow money from the Fed at 0% and lend it out to suckers at 20%.
The Federal Discount Rate has been 0.25% for a while. Not exactly zero, but pretty darn close.
But the real scam is that the banks have learned that if they are "too big to fail", then Congress will simply give them free money. It's not even a loan. They take it out of your paycheck and send it right to the banks!
Anyone checked the consumer confidence index? (Score:2)
https://data.oecd.org/chart/6A... [oecd.org]
Banks are desperate for people to spend money right now. The CLI and the BCI are inflated, no business I know is doing well due to COVID. The last time the CCI dipped like this we had a pretty nasty recession.
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I'm convinced we're in a recession but the big players won't admit it until they can move their money around. The stock and bond market is behaving in an unstable way like it does in a recession. A combination of 2 years of on and off lockdowns, travel restrictions, and trade tensions between US and China and EU and Russia are all contributing factors. My liberal friends think we're close to turning everything around and increasing pay for workers, But I believe the rich have a chance to pull the rug out fr
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I don't think its so much the rich pulling off a rug pull as the rick have the opportunity to insulate themselves when the shit hits the fan the rest of society does not.
If you are the average middle class american for instance most of your 'wealth' as opposed to the cashflow you are living on is tied up in your home and your 401k. You can't do much about your home, you need that to live in. You might be able to alter the asset structure of your 401k but more than likely by the time you are able to affect t
Which is fine, right now. But not after fall (Score:3)
All this consumer spending and free 'floating' cash won't last forever. I read one article that said consumers are spending the 1.2Trillion dumped on the economy at a rate of ~50Billion a month since the pandemic started. I think the cash will start to run out next fall, and that is where I think economic crap will start to hit the fan (could be later than that) as revenue for companies that have seen 'inflated' spending will start to fall. This lack of spending plus inflation and interest rates could start a recession (maybe it happens a few quarters after that). I think this is when you'll
If banks start to give out credit when the next downturn happens it's going to add fuel to the fire of economic downturn.
The biggest problem I have is politicians spending (and overspending) their way out of every economic problem. They keep kicking the economic ball down the road and increase the national debt, which is good in the short term. In the long term we end up paying for it and we haven't even started to pay for it yet. The scariest thing is how much future 'fixing' will happen, because every time this happens we end up spending future GDP today.
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I read one article that said consumers are spending the 1.2Trillion dumped on the economy at a rate of ~50Billion a month since the pandemic started.
At that rate, 1.2 Trillion is already gone - but remember that wasn't excess money for quite a lot of people - whether self employed, furloughed, or the business shut down entirely. People are spending all the money they would have spent on travel, entertainment, and restaurants mostly on "stuff" now.
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Yeah, most everyone will start buying a lot less 'stuff' in the fall because they won't have the cash.
Of course they are (Score:2)
I'd love to loan money at 21.9% APR as well.
These guys make so much money that they don't even want to both fixing the security and fraud issues around the current card and transaction system.
Interest rates are headed up, so of course .... (Score:2)
This is your sign that the economy is getting worse, not better. When things are bad, that's when the lenders get excited to extend a bunch of credit. Yeah, they don't like all the additional defaults -- but they're raking in 2x or more the money on everyone who makes interest payments and a lot of people pay a ton of interest before hitting the point where they can't keep paying. So they're not always out as much as it seems on them.
a vote of confidence in the health of the economy (Score:1)
a vote of confidence in the health of the U.S. economy and Americans' finances.
A cynical move to steal all the "poor people's" money which will end up crashing the economy but we don't give a fuck.
How many people are taught personal finance first? (Score:2)
This should be a prerequisite to getting credit. And then credit should be gradually increased as needed and you prove you can manage it.
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If people were taught personal finance most wouldn't be going to higher education and taking out lifelong debt.
It's just a return to normal (Score:2)
When the pandemic hit in 2020, banks started to be afraid of the liabilities induced by credit cards. In summer 2020, they shut off lots of credit card accounts and they decreased the credit limits of many accounts. Of course, they shut down first the accounts where the holder had lower credit scores.
The pandemic is mostly behind us at this point. Most people have returned to work. So the risk in having credit card accounts from the banks perspective is returning to "business as usual". So naturally, they a
'Confidence', ha ha, that's hilarious (Score:2)
For fuck's sake, it's like these assholes are trying to wreck our civilization. All we need is another global financial collapse, while we're still trying to get a handle on this gods-be-damned
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Why should they care? They now know that they win either way. Either raking in massive profits or getting bailed out.
Rain or shine (Score:1)
bwuahaha (Score:2)
a vote of confidence in the health of the U.S. economy and Americans' finances.
Is it?
Or is it a vote of confidence that when the bubble bursts again, they'll be bailed out again, just like they were the last time they started giving credit to people their internal risk management was flagging with dark-red flags?