Banks were more careful when it came to granting credit card accounts during the first quarter.
A survey of loan officers by the Federal Reserve Board showed that consumers faced a tighter credit market during the first three months of this year.
According to the Fed, while people faced more restrictive standards regarding credit card products, banks also reduced credit amounts for accounts and further spread interest rates across accounts. However, other loans offered to consumers by financial institutions during the first quarter actually saw their requirements relaxed.
“Moreover, the net fraction of banks that reported an increased willingness to make consumer installment loans increased again,” the central bank said. “As in recent quarters, a moderate net fraction of respondents reported weaker demand for consumer loans of all types.”
While banks increased their standards, another report from the Fed showed that consumers did their own belt tightening during the first three months of they year. The first quarter saw revolving consumer credit – most of which is card debt – declined at an annual rate of 6.2 percent. However, overall consumer credit increased 0.4 percent, largely driven by a 4 percent increase in nonrevolving credit.
Although standards were more restrictive for things like credit cards, another report from TransUnion showed that consumer credit risk actually declined during the the first quarter, the first drop seen in this index since the third quarter of 2008. The firm’s Credit Risk Index fell from 129.67 to 128.82, which was a drop of 0.65 percent.
Even though the decline in consumer credit risk was small, Chet Wiermanski, global chief scientist for TransUnion, noted that what matter most was the fact that it was trending in the right direction. If this continues, banks may be more likely to loosen their standards for products like credit cards in the future.
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