According to the latest report from the Fed, it has become tougher to get a credit card now than what it was in the early part of 2010, even though banks are more willing now to lend out other types of loans. The quarterly survey conducted by Fed was released in Monday. It showed that the first quarter has witnessed banks tightening lending standards on both smaller business credit cards as well as consumer credit cards. Starting from 2007, this is the 11th straight quarter when such tightening has been witnessed. As this number has tightened, it was also witnessed that non-card loans have been eased by many banks and were made more available.
The tightening of credit cards includes various ways like interest rate increase, cutting down on the credit limits and increase of the minimum credit score required to qualify for a credit card. These changes aren`t much of a surprise even as credit card issuing banks are blaming the economic crisis and the rules and regulations implemented under the Credit CARD Act for their hesitancy in lending so openly. It is still difficult to get credit cards, even though a bigger percentage of banks had tightened the standard of lending early in 2008 than now.
According to the survey only 6% of the banks have made the lending standards easier while 15% of the banks have tightened the standards in the first quarter. The percentage of banks which have left their standards as is has come down in the latest survey from 90% to 78%. 56 domestic banks along with 23 branches from US have been considered for the survey. According to the survey 27% of the banks had raised the interest rates, 12 percent raised the minimum credit scores, while 29% of the banks reduced the credit card limits. According to the survey, the spending of the consumers has increased at twice the rate as the income, even as savings rates are declining. Faced with difficulty in accessing the credit, the consumers are digging deep into their own savings accounts to fund purchases.
There has been some good news too. Analysts predict growth in the economy even as the spending of the US consumers increased at a rapid pace compared to the last 3 years, resulting in 3.2% growth in the GDP. The lending standards` tightening has also been appreciated in a way given that the crisis was partially caused by the bad lending standards earlier.