July 7, 2009

Banks slash new credit card issuances

U.S. banks are pulling back dramatically on issuing new credit cards, and even low-risk borrowers are feeling the pinch, statistics indicate.

Equifax credit bureau data showed in the first four months 2009, banks issued 9.8 million new credit cards, representing a 38 percent plunge from the same period in 2008, while those who still can get credit are seeing limits that are 3 percent lower, USA Today reported Tuesday.

The numbers come in spite of massive efforts by the U.S. government to loosen the credit market, observers said.

Mark Zandi, chief economist at Moody's Economy.com, told USA Today while it's not a shock to see banks reining in credit during a recession, what's remarkable is the very sharp decline in lending.

But, if the cutbacks mean banks are doing better underwriting, that could be a positive thing, added Lauren Zeichner Bowne of Consumers Union, the publisher of Consumer Reports. She added, however, that her group has concerns that card issuers are rolling back limits for responsible users, the newspaper said.