The sub prime market of credit cards has always been around and always will be. Access to cheap credit -regardless of consequence - will lure in those who know no better or those in a cash-strapped situation. It would appear that for the first time since the recession, this segment of the credit market is growing once again.
Equifax released a new report showing that the lending of bank credit cards to consumers with sub prime credit has increased more than 40 percent between 2010 and 2011, and the same report also shows that card limits grew by a whopping 55 percent in the same time period (to a total of $12.5 billion).
While growth is occurring in all sectors of the credit card industry, the sub prime sector is growing far more rapidly than the others. For comparison, nominal growth in the industry overall grew by 18 percent in the same year and is the highest total of opened cards since 2008. Despite all the growth, the industry as a whole is still below where it was prior to the recession.
While accepting sub prime credit is never a good idea as an individual, it is good to see lenders extending lines of credit once again. The massive increase in sub prime lending shows that the markets are beginning to warm up to consumer lending on all levels, which can lead to added economic growth in some sectors over the next few years.
But some are worried what this may mean for the future of the economy. The Federal Reserve has shown that over the past two months, credit overall has actually tightened by approximately 7%, which could indicate another dip in employment and consumer borrowing if the pattern holds. It makes sense, however, for some lenders to test the sub prime waters while simultaneously removing other credit options from the market.