PhotoLiberty Street Economics, a group affiliated with the Federal Reserve Bank of New York, which monitors credit usage, reports overall household debt increased slightly in the second quarter of the year. Mortgage debt dipped slightly while auto loan and credit card debt rose.

But drilling deeper into the data, the report shows consumers with a subprime credit score of 620 or below have increased their use of credit cards. Whether that's good news or bad, of course, depends entirely on how those cards are used.

In 2007, just before the credit crisis, about 60% of subprime consumers had at least one credit card. After the financial crisis hit, subprime card issuers unilaterally closed millions of accounts, getting these subprime consumers off their books. Today, the percentage of subprime consumers with a credit card has fallen to 50%.

Handy in an emergency

For consumers, having access to a credit card can be important when an emergency occurs, such as an unexpected car repair bill or a trip to the emergency room. Without a credit card, many subprime borrowers turn to payday lenders.

The report also looks at credit card balances – the amount of money that remains on an account each month and is not paid off at the end of a billing cycle. Only 40% of cardholders carry a balance of $1,000 or less while 14% have balances of more than $10,000.

“When comparing the distribution of balances across credit score groups, we see some surprises,” the authors write. “While an increase in a borrower’s credit score is initially accompanied by an upward shift in the debt balance distribution, borrowers with the highest credit scores instead are much more likely to hold smaller debt balances compared to all other groups.”

In other words, as a consumer's credit score improves, he or she is more likely to take on more debt. However, this increase stops and begins to fall when consumers reach the highest level of credit scores.

The percentage of consumers with at least one credit card peaked at 68% just before the crash, plunging to 59% afterwards. It now stands at around 61%.

So far, so good

So far, at least, both prime and subprime consumers appear to be handling their increased use of credit cards better than in recent years. Credit card delinquency is trending downward since 2008, but that may be a result of more credit concentrated among high credit score consumers.

Consumers at the lower end of the scale, once squeezed out of the market and paying down debt, are now beginning to open new accounts. The report credits improving economic conditions, tighter lending standards, and a more stable credit card market.

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