New Credit Card Openings Drop as Banks Target Higher-Income Consumers

Banks are reportedly increasing their efforts to promote credit cards to higher-income consumers while raising the qualification requirements for lower-income ones.

Overall, the number of new credit card openings dropped for the first time in more than a year in the second quarter, The Wall Street Journal (WSJ) reported Friday (July 25).

Compared to the same quarter a year earlier, the number is down 5%, according to the report.

Lenders are increasingly focusing their promotional efforts on higher-income consumers, the report said. For example, over the past month, JPMorgan Chase and Citigroup both introduced enhanced premium cards, while Capital One opened a new luxury lounge in New York’s John F. Kennedy International Airport.

At the same time, lenders are making it harder for lower-income consumers to get cards, per the report. The share of credit card-related mail volume that was sent only to consumers who met certain credit criteria reached its highest level in nearly three years in April, and more banks tightened their criteria for new cards than lower them, the report said.

PYMNTS reported Wednesday (July 23) that subprime borrowers are 3.6 times more likely to show interest in obtaining a new credit card than those with the highest credit scores.

Recent earnings reports from financial firms indicated that consumers, including subprime ones, are meeting their debt burdens, although there are signs that some are feeling pressure from stubborn inflation and a rocky macroeconomic environment.

During a Tuesday (July 22) earnings call, Capital One CEO Richard Fairbank said that while the U.S. consumer “is in a great place,” there are “some pockets of consumers [that] are feeling pressure from the cumulative effects of inflation and higher interest rates. And we’re still seeing some delayed charge-off effects from the pandemic, although the improving trend in our delinquencies suggest these effects are moderating.”

Starter cards geared toward non-prime customers can provide an entry point that leads to a “graduation strategy” that qualifies them to be offered a prime product, Rolando De Gracia, chief commercial officer at Concora Credit, told PYMNTS in an interview posted July 15.

“Once that consumer is eligible for that product, they’ll take it,” De Gracia said. “Why? Because of better rewards and lower fees.”

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