Not-so-good credit? No problem, the banks said last year. Here's a credit card.
All right, maybe it wasn't that easy, but more Americans with spotty credit got a credit card in 2011, according to a report released Wednesday by TransUnion. The credit reporting agency found that 25.2 percent of the cards issued in 2011 went to consumers with lower than prime credit scores. That's up from 21.8 percent in 2010.
Part of the reason banks started courting Americans with not-so-stellar credit is because of the intense competition among lenders to score prime consumers, says Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. Consumers' new penchant for reducing their debt also forced banks to find new places to make money.
So what was left was the subprime market.
But even as riskier consumers added more credit cards to their wallets, a funny thing happened. The rate at which consumers were 90 days or more behind on their credit card payments stayed near historic lows. (The lowest rate in TransUnion's survey was reached in the second quarter of last year.)
It's true, there was a small bump-up in the final quarter of last year, but that can be chalked up to seasonality. Overall, the 0.78 percent delinquency rate in the fourth quarter was the best year-end level in 17 years.
TransUnion forecasts that delinquency rates will trend upward slightly in the near term before dropping again at the end of the year.
Here's another factor to keep an eye on: The average credit card debt per borrower rose $442 to $5,204 in the fourth quarter from the previous quarter. That can add up if a cardholder doesn't pay off the entire balance every month and instead opts for the minimum payment.
If you're charging more on your credit card, make sure to set aside enough money in your bank account to cover the entire bill every month.
What's your take: Is it dangerous for banks to start doling out credit cards to consumers with riskier credit? Why or why not?
Follow me on Twitter: @JannaHerron.