Barclays, one of the largest banks in the world by assets, reports that the market for asset-backed securities is so strong that banks are selling their credit card assets with rates only .42% higher than safe US Treasuries. The implications are huge – credit card companies are finding it cheaper to finance credit cards for American consumers, and may soon speed up the rate at which they lend.
American Express, and General Electric (parent company of GE Money Bank, which funds many consumer credit cards) have been some of the most prolific issuers of new asset-backed securities. Retail stores are also finding more funding. Victoria’s Secret, Pottery Barn, Ann Taylor, and other retailers, are selling off their credit card portfolios in a move that will allow retail stores to issue new store credit cards to consumers.
Are Subprime Cards Back?
When credit card companies find it easier to borrow, the usual outcome is more credit card issuance to more people. In particular, those with low credit scores are a major beneficiary of lower credit card rates. Companies are more aggressive with their lending when they can finance their portfolios inexpensively.
Since the financial crisis, banks have been aggressive in lending only to customers with good or better credit scores. Now, it seems, the market for subprime credit card debt may come back, extending credit to more people in more credit rating brackets.
Source:
creditcardflyers.com
