Dive Brief:

• The rate at which consumers reported in October that they had applied for a credit card during the prior 12-month period rose to 27.1%, climbing from 26.5% a year ago and from 26.3% in February 2020 before the COVID-19 pandemic struck, according to a press release from the New York Federal Reserve Bank. Nonetheless, the application rate was down slightly from 27.7% in June of this year.
• Egging on the consumer trend was a lower rejection rate by credit card issuers. The rejection rate this year for credit card applications, on average, dropped by 2.4 percentage points to 18.5%, the Fed’s survey results showed. The bank’s Center for Microeconomic Data produced the report based on its Consumer Expectations and Credit Access Survey.
• “The strength in credit card demand and access coincided with the record growth in credit card balances over the past year,” the Fed’s Nov. 21 release said.

Dive Insight:

The last time the 12-month consumer application rate for credit cards was higher than in June of this year was in June 2019 when it reached 28.4%, according to the Fed’s data.

In a slightly different measure of the credit card application rate, the Fed said this year’s average rate at which consumers reported applying for a card in the past 12 months was 26.7%. That was up 3.6 percentage points from the average rate for 2021.

Credit card balances have soared in recent months on more purchasing and inflated prices for goods, with debt burdens and delinquencies rising more rapidly for younger and less wealthy borrowers, the Federal Reserve Bank of New York said in a separate report last week. Americans’ credit card balances climbed $38 billion, or 15%, in the third quarter, over the second quarter, Fed researchers wrote in that report. That was the largest increase in more than two decades, and it contributed significantly to total household debt reaching $16.51 trillion, the Fed said.

By contrast, in other areas of lending, consumer demand for credit was dropping this year, or staying the same, and rejection rates by lenders were rising, the New York Fed said in its latest survey report. That was true with respect to application rates for auto loans, home mortgages and mortgage refinancings, the Fed said.

As for consumers asking for credit card limit increases, that rate remained about the same this year, at 11.2% in October 2022, compared to 11.3% in October 2021, the Fed said. Those levels were below the pre-pandemic 12.0% level in October 2019.

Looking forward, more consumers expect to need access to credit via new or existing cards. Over the next 12 months, the average likelihood of those surveyed applying for a credit card, or seeking a limit increase, rose to 13.6% and 7.2%, respectively, in October, up from 12.0% and 6.9% in October 2021.

The Fed fields the survey three times each year, so every four months, and issues a press release on trends annually in November. The Fed’s internet-based survey is based on a rotating panel of approximately 1,300 household heads, with respondents participating for up to 12 months.