Category: Credit Cards

In the last several months, many consumers, including those who have tried to reduce debt due to past financial problems, may have found themselves receiving a larger number of credit card offers.

The nation's top credit card issuers are now aggressively broadening their lending standards in an effort to expand their customer base, according to a report from TIME Moneyland. And one of the primary ways they're doing so is not by targeting those with troubled credit histories, but rather sending extremely valuable introductory offers to consumers with the best credit scores. And in the last few months, as lender competition for these superprime borrowers has heated up considerably, the value of those initial offers has grown significantly.

Just last summer, top-notch borrowers could expect to get hundreds of dollars worth of bonus points, miles or cash back, just for signing up, and spending a certain amount in the first few months the account is open, the report said. But now, the most aggressive of these offers are worth more than $1,000 to borrowers who meet certain spending thresholds.

For example, the ThankYou Premier card from Citi will grant new cardholders a maximum of 80,000 points for signing up and then spending $3,000 on the card within the first three months the account is open, the report said. Those points are worth $1,060, meaning consumers are essentially earning more than 33 percent cash back on the initial offer.

However, that deal is beaten out by the offer for new customers who get an American Express Platinum card, the report said. The maximum value of that introductory offer is 100,000 points, which can be worth as much as $1,200. This card, too, has the $3,000 spending threshold in the first three months the account is open, but the total value of the cash back offer is 40 percent of that spending.

However, consumers should keep in mind that these offers also come with sizable annual fees that can take a lot of spending on a card to cover with rewards points. They also typically carry higher interest rates than no frills cards, meaning that credit card debt can pile up far more quickly on such an account if the balance isn't being paid off in full at the end of every month.

While many consumers made efforts to reduce debt during and after the recent recession, some have been tempted to start borrowing on credit cards again, and experts believe this may be leading to significant financial difficulties for some.

The final quarter of 2011 saw an increase in the amount of credit risk consumers faced, and much of that was the result of borrowers falling behind on their mortgage payments, according to a report from Your Money Matters. Some experts believe this is a consequence of subprime borrowers once again having access to credit cards that they had been locked out of in the past, as lenders have made an effort to extend credit to riskier consumers once again.

As a result, many may see credit cards as something they cannot afford to miss out on again, and are therefore prioritizing their card payments ahead of their mortgages, the report said.

Consumers have generally been very good about making efforts to cut their credit card debt since the recession, and all of the nation's top lenders have seen delinquencies and defaults plunge as a result.

The nation's sixth-largest credit card lender by spending saw consumers use their cards more often in the first fiscal quarter of the year, as well as get a better handle on paying down their credit card debt.

Consumers used cards issued by Discover Financial Services more often in the first three months of the new fiscal year, and also continued to make efforts to reduce debt, which led to a huge increase in profits on a year-over-year basis, according to a report from the Wall Street Journal. In all, Discover saw profits jump 36 percent on an annual basis to $631 million, up from just $465 million in the same period last year.

"Continued improvements in credit performance, solid organic growth in each of our lending products and strong volume growth across our networks were key drivers of this quarter's earnings," said David Nelms, chairman and chief executive officer of Discover, according to the newspaper.

In all, Discover cardholders used their accounts more often in the three-month period, and purchase volume – the amount of money spent on the cards – climbed 7 percent to $25.6 billion, the report said. And at the same time, those borrowers also significantly reduced the number of outstanding balances they carried.

Discover's delinquency rate fell to just 2.22 percent in the first quarter, down from 2.39 percent in the fourth quarter of 2011, and a significant decline from the 3.59 percent observed on an annual basis. Further, its charge off rate – the total percentage of balances that had to be stricken from lender records as being uncollectable – dropped to 3.09 percent. In the previous quarter, it stood at 3.24 percent, and was at 5.96 percent during the first fiscal quarter of 2011.

As a result of sliding delinquencies and defaults, Discover had just $226 million set aside to cover loan losses, down from $271 million in the same quarter last year, the report said.

In general, consumers have been more conscientious in paying down their outstanding credit card debt and avoiding late payments for more than a year now, leading to all of the nation's top lenders reporting sinking delinquency and default rates. However, some experts also caution that these rates may soon bottom out and could begin climbing again to figures that are more in line with historical averages.

Recent laws have made it more difficult for young adults to take on credit card debt by limiting the ways in which they can actually obtain an account, but now many lenders are trying to skirt federal regulations.

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 made it so that lenders couldn't market on campuses, as a means of preventing college students and other consumers under the age of 21 from falling into troublesome debt, according to a report from the Charleston Business Journal. Now, many have stepped up marketing of new accounts through social networks like Facebook, where most college kids spend a lot of their online lives.

And though the protections may not be helping college students to actually reduce debt, the rate at which they're taking on credit has slowed considerably, and the number of young adults who have these accounts is also declining, the report said. In all, the number of college students who have their own card has fallen 27 percent since 2009.

One provision of the law is that those under 21 must either provide proof of adequate income when opening an account or otherwise have an adult co-signer.

Many consumers have made significant efforts to reduce debt in the past few years, but at the same time, a large number of younger Americans have been racking up significant balances on several different kinds of accounts.

The average person in the 20s now carries some $45,000 in outstanding debts in student loans, credit card debt, auto loans and mortgages, though they tend to understandably pick up more as they age, according to a new survey from the PNC Financial Services Group. Those who were 20 or 21 had just $12,000 in outstanding balances, and while one-fifth had credit card debt, most of that was comprised of education loans. Only 9 percent and 3 percent had auto loans or mortgage debt, respectively.

But by the time consumers were 28 or 29, they had an average of $78,000 in debt, the report said. More than half still had education debt, while 48 percent had credit cards, 38 percent had car loans, and 29 percent had mortgages.

Experts believe that student loan debt will only become a larger problem for young adults in the near future as tuitions rise nationwide and the importance of having a college degree when applying for jobs increases.

After a slight uptick in problems in the month of January, consumers returned to being conscientious in their efforts to reduce debt in February, leading to fewer late payments and a slightly lower charge off rate for the nation's top six lenders.

Delinquent credit card debt decreased in the month of February for five of the nation's top six lenders as consumers returned to their post-recession borrowing habits after eschewing them slightly as a result of the holiday shopping season, according to a report from Dow Jones Newswires. Only American Express did not see fewer delinquencies, but it said that its late payment rate held steady.

However, when it came to balances that were so far behind on payments they had to be written off as uncollectable, half of those lenders – American Express, Discover and Citi – saw increases, the report said.

Instances of both delinquencies and defaults are still hovering near all-time lows as a result of consumers making greater efforts to cut their outstanding balances and use their credit cards more responsibly during and immediately following the recession.

Consumers may now be feeling better about their financial standing and feel they're in a improved position to once again handle credit card debt, because the number of transactions on their cards are increasing significantly.

Both Visa and MasterCard, the world's two largest processors of credit and debit card transactions, announced that they've seen the number and value of credit purchases rising recently, according to a report from Dow Jones Newswires. For Visa's part, it saw the total number of U.S. credit and debit transactions it processed in February rise 6 percent on a year-over-year basis, with credit purchases rising 11 percent and debit transactions climbing 4 percent.

And during the first two months of the year, MasterCard has seen even more significant increases in card use, the report said. The world's second-biggest payment processor saw U.S. transaction volumes increase 26 percent overall in January and February, while the value of those purchases climbed 14 percent.

Rising credit card purchase values may make it more difficult for consumers to reduce debt down the road, but with the economic recovery fully under way, many may feel more capable of handling those concerns.

While consumers' attitudes toward borrowing changed drastically during the recession, many have begun to feel more comfortable with credit card debt as economic conditions improve nationwide.

As a consequence of those two factors, lenders are now extending more lines of credit to borrowers, but are reserving their best offers to those whose credit scores are around 740 or higher, according to a report from Jacksonville, Florida, television station WJXT. In many cases these days, borrowers with top-notch scores may be able to receive credit cards with interest rates in the single digits, more generous balance transfer offers, or more beneficial rewards programs.

"Credit card issuers have come out of their shell," Greg McBride of Bankrate told the news station. "They're now back on offense, they are trying to grow their businesses but they're trying to do so primarily through top credit quality consumers."

But at the same time, because competition for top borrowers is so fierce, some lenders are also extending more offers to borrowers with rockier histories as well, the report said.

Lower interest rates can help consumers to more quickly reduce debt and have a little more certainty with their finances going forward.

Americans made significant efforts to reduce debt on their credit card accounts during the month of January, reversing several months of increases in the amount of credit card debt they carried.

During the month of January, the amount of debt carried on consumers' credit cards slipped 4.4 percent to a nationwide total of $800.9 billion, down from December's $803.8 billion, according to the latest statistics on consumer credit released by the Federal Reserve Board. In November, the amount borrowed on consumers' cards increased 9.9 percent, followed by another 5.5 percent increase before the end of 2011.

But even as consumers continued to trim the amount they owed on their credit cards, they also significantly increased borrowing in other areas, the report said. Nonrevolving credit – installment loans like those for education or auto purchases, but not including mortgages – rose 14.7 percent to more than $1.71 billion.

Experts had noted that the increases in credit card debt seen in the last few months, while sizable, may have been the result of seasonal shifts in borrowing for the holidays, which are usually seen every year.

Consumers who are wary of the high cost of dealing with credit card debt and had worked hard to chisel down their balances may be excited to learn that lenders are once again offering more affordable accounts.

Though the hottest competition among the nation's top credit card lenders remains for those who have the best possible credit scores, consumers with more modest incomes and credit ratings may soon find that the offers they receive for less expensive accounts are increasing, according to a report from the Wall Street Journal. These days, lenders are once again seeing the value in marketing low-rate cards to consumers of more modest means who previously had worked to reduce debt and get their finances under control.

The type of cards now being offered to these borrowers typically comes with low interest rates and almost no fees, but also no rewards or other perks, the report said.

In previous months, most credit card marketing was geared toward those who have higher credit ratings, for accounts that have top-notch rewards programs attached.