Credit card creations continue at record pace, even as sign-up bonuses dwindle

Americans are opening more credit card accounts than ever before. There have only been seven months in history with over 6.5 million credit card issues in the United States, and six of those are the most recent six months. reported by Equifax (May to October 2021).

The only other was in August 2019, when 6.7 million accounts were opened. The 2021 surge included these monthly totals:

  • May 2021: 6.6 million credit card issues
  • June 2021: 6.93 million
  • July 2021: 6.85 million
  • August 2021: 6.79 million
  • September 2021: 6.53 million
  • October 2021: 6.64 million

Compared to January to October 2020, credit card creations in the first 10 months of 2021 increased by 46%. Clearly, the 2020 figure was held in check by the tremendous uncertainty that dominated the early stages of the COVID-19 pandemic. Lenders were nervous and that year ended with the fewest new credit card accounts issued by banks since 2013.

Still, creations in the first 10 months of 2021 were 4.6% higher than the level in 2019, which was the previous record high for any year on record. And growth accelerated as the year progressed. From May to October 2021, creations increased by around 12% compared to the same period in 2019.

Lenders’ worst fears have not come true

The expected spike in delinquencies and defaults never happened in 2020 or 2021 – largely thanks to government assistance such as stimulus payments and increased unemployment benefits – so lenders gradually eased their credit standards as 2021 progressed. Last summer also included a particularly robust set of introductory bonuses.

At the time, many believed the pandemic was coming to an end, thanks to the widespread availability of vaccines and a sharp drop in COVID cases. Competition has been particularly intense on travel credit cards. Card issuers have sought to capitalize on Americans’ desire to break out of lockdowns, reconnect with family and friends and check bucket list destinations.

Popular travel cards such as the Platinum® card from American Express, the Chase Sapphire Preferred® card, the Capital One Venture Rewards credit card and the Citi Premier® card have all offered record sign-up bonuses in front of thirsty consumers of travel.

Not to be outdone, the cash back category has also revived with the launch of attractive cards such as the Wells Fargo Active Cash℠ Card and Citi Custom Cash℠ Card.

Even the previously sleepy 0% balance transfer space has rebounded with interest-free terms lasting up to 21 months.

COVID is not gone, but things seem to be improving

Unfortunately, the pandemic was not over by mid-2021, but demand for credit cards remained strong. While the Delta and Omicron variants caused a dramatic increase in COVID cases during the fall and winter of 2021 and 2022, each successive wave appears to have had a less significant effect on Americans’ finances.

Delinquencies and delinquencies on credit cards and other financial products have remained very low, the unemployment rate is down and the economy has experienced solid growth. Card issuers seem happy with the current situation. In fact, their biggest complaint seems to be that too many cardholders are paying off their balance (although this trend has begun to reversewhich is more profitable for banks and less desirable for consumers).

Sign-up bonuses aren’t as high as they were last summer and fall, but they’re still good. Demand for new credit cards remained high and virus cases dropped significantly.

Are we entering a second Roaring Twenties?

While we don’t know for sure if Omicron is the last big wave of the pandemic, we have more tools than ever to fight the virus. Moreover, the population has become even more weary of COVID restrictions. There is a huge pent-up demand to resume activities such as travelling, dining out and attending concerts and sporting events.

There’s plenty of data to back up the optimistic theory that we’re about to embark on a second ‘Roaring Twenties’. For example, Bank of America claims that its credit card customers spent 28% more in January 2022 than they did a year ago. Sales of goods have been remarkably strong throughout the pandemic, but spending on services has been weaker.

It looks like an increase in service purchases is likely as more people feel comfortable leaving their homes. And traditionally, Americans have been more inclined to put travel, dining and other discretionary spending on credit cards, often opting for cash and debit cards for basic necessities such as groceries and gasoline.

The bottom line

As your lifestyle and the market continue to evolve, it’s a good time to review your credit cards.

Anyone with credit card debt should prioritize their interest rate, especially with rates likely to rise from their already high average of 16.28%. A 0% balance transfer card could save you a ton of money if you carry a balance from month to month.

If you have a big trip ahead of you, you can cover some of those costs with a new travel card. On the other hand, cash back offers universal appeal.

Card issuers compete aggressively for your business, so take advantage of this by signing up for a new card with a low interest rate, attractive sign-up bonus, or attractive ongoing rewards.

Have a question about credit cards? Email me at [email protected] and I’d be happy to help.