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Credit card limits are increasing, so should we worry?

by Peter Andrew

People are being granted higher credit card limits, according to new figures released June 13 by Experian, one of the "big-3" credit bureaus. However, data about late payments, published at the same time, suggest that consumers are generally managing the additional allowance responsibly, and few are encountering problems in making payments.

Credit card debt up

Experian's study suggests that continuing rises over multiple quarters culminated in a 20-percent year-over-year increase in credit card limits during the first three months of 2013. That's about $11 billion.

Drilling down into the data reveals year-over-year growth of about 30 percent in prime lending, and 42 percent among near-prime borrowers. That latter group comprises consumers who might have had financial problems in the past, but whose credit scores are higher than those in the subprime category.

Credit card borrowing manageable

At least so far, lending to near-prime consumers seems to have paid off for credit card companies, with Experian reporting that delinquencies (accounts 30-180 days past due) remain near record lows. The number of those in more difficulty grew slightly, with "charge-offs" (industry jargon for when issuers write debts off their books and pass them for collection) nudging up to 4.3 percent from 3.9 percent during the first quarter of this year, a phenomenon the credit bureau described as a slight, seasonal uptick.

Indeed, Experian appears content that the additional debt potential remains at easily manageable levels. The company's director of product management and strategy Linda Haran remarked in a statement, "There is clearly opportunity in the near-prime segment, and lenders are definitely starting to loosen their criteria to acquire some bankcard growth. We have always felt that near-prime consumers were ready to take on a little more debt than was being extended to them." Haran continued, "This is a trend that we will continue to watch from a delinquency standpoint to get a sense of how near-prime paper is performing."

All of which means that you today stand a better chance of seeing your credit card application approved than you have for some years. That's a good thing, but only if you're confident you can avoid becoming a statistic when delinquencies and charge-offs start to rise again.

Published 06/19/13 (Modified 11/18/13)

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