Credit Card Applications Rise to Pre-Pandemic Levels — Is It Cause for Concern as COVID Rages On?

Woman in protective face mask using the phone at a public place. stock photo
Photoboyko /

American consumers are applying for credit cards at pre-pandemic rates, an increase that is broad-based across age and credit score groups, according to the New York Federal Reserve.

Stimulus Update: See What States Are Sending Checks in December
The Year in Review: From Stimulus Checks to Social Security, a Look Back at Our Most-Read Money Stories of the Year

The application rate for credit cards rose throughout 2021, reaching 26.5% in October, 10.8 percentage points higher than its October 2020 level, which was a series low, the New York Fed data indicated. In addition, data showed that the application rate for credit card limit increases also rebounded from the October 2020 low of 7.1% to 11.3% in October 2021, just below its October 2019 level of 12.0%. This increase was also broad-based across age and credit score groups.

Erica Seppala, Financial Analyst at Merchant Maverick, told GOBankingRates that as the world starts to recover from the effects of the COVID pandemic, consumers are feeling more confident in taking on debt, as well as applying for loans and credit cards again.

“As we approach the holidays, consumers are looking for a backup source of funding for emergencies, and borrowers that are still playing ‘catch up’ from loss of wages (due to the pandemic),” Seppala said. “So, it should be no surprise that credit card applications are on the rise.” In additions, she warned that consumers should be extremely cautious moving forward, as the country is still recovering from the pandemic. Lenders may loosen their borrowing requirements, approving consumers that wouldn’t have previously qualified for higher credit limits — if they even qualified at all — prior to the pandemic, she explained.

Get Credit Card Perks

More: How Credit Card Use Has Changed Amid the Pandemic

“Consumers should read the terms and conditions for every card they’re applying for, as high interest rates and annual fees quickly stack up,” Seppala added. “People should also be cautious of how much they’re spending and should pay down debt as quickly as possible to avoid paying interest for an extended period of time. It’s easy to get comfortable as our world returns to normal, but racking up credit card debt only to potentially face financial challenges in the near future, can be disastrous.”

Finally, she warned that consumers that do opt to open new credit accounts should also be mindful of how credit cards can impact credit scores. “While opening a new credit card to lower credit utilization — or to pay off a higher interest card — may be a wise move, applying for or opening multiple cards or carrying a high balance could have negative effects on both your credit score and your finances.”

Some experts, however, note that the New York Fed report doesn’t paint a full picture and that while credit card applications are rebounding, that is mostly due to a surge in marketing.

“If you follow the money instead, credit card balances are still well below pre-pandemic levels due to record consumer liquidity from government programs and the rapid adoption of alternative FinTech products,” Jeanniey Walden, Chief Innovation and Marketing Officer at DailyPay, told GOBankingRates.

Learn: How Buy Now, Pay Later Loans through Affirm & Afterpay Can Decrease Your Credit Score
Find: Survey Suggests 20% Will Use ‘Buy Now, Pay Later’ for 2021 Holiday Shopping — Millennials and Gen Z Lead the Pack

“Some consumers are using “buy now pay later” instead of credit cards, while others are avoiding the need for credit altogether through on-demand pay programs offered by their employers,” she said.

Get Credit Card Perks

More From GOBankingRates


See Today's Best
Banking Offers