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Banks are giving away credit cards at a rate.
Bank of America Merrill Lynch reported strong third-quarter earnings on Monday, and buried in the earnings release was this factoid: New US consumer credit card issuance hit the highest level since 2008.
The bank issued 1.3 million credit cards during the three-month period, with total credit card loans for the period averaging $88.2 billion in the US and a further $9.7 billion outside the US.
There was a similar story at Citigroup, where credit card loans hit $147.8 billion, up 13% from a year ago.
And at JPMorgan, a whopping 2.7 million new accounts were opened during the third quarter, sending JPMorgan’s credit card balance to $133.4 billion, up 5% from a year ago.
Jamie Dimon, JPMorgan CEO, even mentioned the bank’s Sapphire Reserve, the credit card people have been going nuts for, in his earnings comments.
The boom in credit cards is something we’ve been tracking for a while at Business Insider. In August, the Liberty Street Economics blog at the Federal Reserve Bank of New York published a study on recent developments in consumer credit card borrowing that highlighted booming new card issuance.
The increase has been driven by those with lower credit scores, though these people were getting historically lower credit limits.
“Although new cards are disproportionately issued to lower credit score borrowers, the overall extension of new credit, measured by increases in aggregate credit limits, continues to go overwhelmingly to those with credit scores above 720,” the researchers wrote.
The business case for growing credit card balances is clear.
Bank of America said in its earnings release that the yield for US credit cards stood at 9.3% in the third quarter, making it a highly profitable business.
But of course, there are risks involved, too.
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