Are consumers taking on too much credit card debt?
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Are consumers taking on too much credit card debt?
U.S. banks are lending to consumers at the fastest rate since 2007 and the increasing debt is causing concern given the slowing economy, the Financial Times (subscription required) reported this week.
Lenders issued $18 billion in debt debt for card loans and other types of revolving credit within a three-month period. The second quarter results for several banks show an overall increase of credit card loans, ranging from 10 percent for Wells Fargo to 26 percent for the smaller Atlanta-based SunTrust.
All together, these banks —Wells Fargo, Citigroup, US Bank and SunTrust — hold about $216 billion in consumer debt, according to their Q2 earnings.
Coupled with growing uncertainty from this year’s election and more consumers missing payments, experts think this increased lending could spell trouble for lenders down the road.
Synchrony Financial, biggest issuer of retail store credit cards said last month that more and more consumers are missing payments.
Joel Bines of consultancy AlixPartners told Marketplace last month that banks are starting to do what they did before the recession — make more money by lending to people who probably shouldn’t be borrowing.
“The model of loosened credit standards to chase yield and lend deeper to a segment of consumers. It just doesn’t end well,” Bines said. “I mean, it never ends well.”
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