Credit Card Applications Reach New Pandemic High

According to data from the Federal Reserve Bank of New York, as of October 2021 nearly 27 percent of U.S. consumers applied for a credit card in the past 12 months, the highest level since 2019 and much higher than the record low of 16 percent in 2020. The data suggests that consumers could continue to drive the nation’s economic recovery during the pandemic.

“Many things are slowly returning to more normal times,” said New York Fed senior vice president Wilbert van der Klaauw, according to the Wall Street Journal. “With that, you expect the demand for credit to come back to pre-pandemic levels and continue on the same growth path.”

Though the demand for credit cards fell throughout the early months of the pandemic, levels began to rise earlier this year as the COVID-19 vaccinations boosted the economy. However, the New York Fed data did not account for the Omicron variant that has rapidly swept across the nation in recent weeks, which could halt travel plans and negatively impact supply chains.

Lenders are trying to get more people to sign up for cards by sending out more card offers and easing borrowing requirements, like accepting lower credit scores. However, the rise in credit card applications does not guarantee that banks will see more profit for lenders.

Consumers are requesting more cards and spending more with them, but they are also paying off balances more quickly than before the pandemic, as banks charge interest on balances carried month-to-month. The New York Fed found that credit-card balances are $123 billion lower than they were at the end of 2019.

Additionally, consumers want to borrow more on their existing cards; more than 11 percent of consumers stated that they applied for credit-limit increases in the past year, which rose from about 7 percent in the fourth quarter of 2020.