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Credit card companies going after riskier customers, report says

June 27, 2014, 12:23 PM UTC
American Express Co. Credit Cards & Signage Ahead Of Earns Figures
Credit card company logos are displayed in a shop window in New York.
Scott Eells/Bloomberg—Getty

Subprime borrowers are being issued credit cards at the greatest rate side before the financial crisis, according to a report in the Wall Street Journal Friday.

Around 3.7 million cards where issued to subprime lenders during the first quarter. That’s 39% more than in the same quarter year last year and the most since 2008. The Journal’s numbers are based on exclusive data supplied by the credit bureau Equifax.

Subprime borrowers represented around one-third of all credit cards issued. Subprime borrowers have credit scores below 660.

For many people, hearing the term “subprime” likely brings back memories of the subprime housing crisis that dominated headlines in the early days of the Great Recession. That crisis led to a decrease in subprime lending across the board. The resurgence of subprime lending in the credit card sector is yet another sign the segment may be making a comeback — subprime lending has increased steadily in the auto loans space in the past year as well.

With revenue waning, subprime borrowers are attractive to banks because they tend to pay higher interest rates, generating more revenue for the financial institution, the newspaper notes, adding that this is the case as long as the borrowers don’t stop making their minimum required payments.