Consumers are back in a borrowing mood. For a number of years during and after the Great Recession, aggregate consumer debt was in decline as families sought to deleverage. Part of this deleveraging was forced on people who found it generally more difficult to obtain credit relative to the past. But this has changed.
Total consumer debt outstanding in the U.S. is rising again as reported by CNBC. Some of this growth has been in the category of non-revolving credit, particularly automobile loans, thanks to record low interest rates. But revolving credit, mainly in the form of credit cards, is also up. Remarkably, the largest growth in new credit cards is associated with subprime borrowers, or those whose credit scores are below 660 according to the most recent Equifax data.
Through July of the current year, banks handed out credit cards to 9.8 million subprime borrowers, which represents a 6-year high and an increase of 43% from the same period one year ago. Another 7.8 million cards have been issued to subprime borrowers by retailers this year, up 13% from 2013 to an 8-year high. Lenders are also giving subprime borrowers higher credit limits. The new normal is beginning to look a lot like the old one.
