Borrowers who applied for credit card credit card debt not as much as the general population

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Borrowers who applied for credit card credit card debt not as much as the general population

Reuters - Borrowers who apply for buy now, pay later or other point of sale financing tend not to pay down their credit card debts as much as the general population, Credit Reporting Company TransUnion said on Thursday.

The conclusion, from a new study, indicates that credit cards did not lose as much business as suspected during the pandemic due to the rise of buy now, pay later plans.

These new forms of credit expand the credit pie, thus opening up more opportunities for consumers and lenders, said Liz Pagel, senior vice president of consumer lending at TransUnion.

The study looked at the credit profiles of more than 4.5 million applicants who applied for point-of-sale financing in October 2019 to March.

TransUnion found that a smaller portion of people who applied had reduced their card debt, 54%, compared with 60% of the general population. Some 20% actually increased credit card debt by more than half.

Though online financial services companies have lured shoppers https: www.reuters.com. com article us-usa - consumers pay for later-idUSKBN 2 A 8036 with the additional ways to borrow, big banks have continued to predict that card lending revenue will increase as card balances rebound from being paid down during coronavirus lockdowns.

The study did not determine how much additional card lending banks lost to pay now, buy later. In a separate TransUnion survey in August, one-third of people who used a pay now plan said they would have used a credit card had the plan not been available.

Applicants do not appear to be increasing the risk of losses on existing loans, TransUnion said. Delinquency rates on credit cards were slightly worse than the general population but three % versus 2.7% just six months after their application.

Pagel does not look like consumers are over leveraging themselves at this point, said Miller.