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.

By Lynne Marek on Nov 22, 2022
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