Credit card spending on the rise

American Banker has noticed another positive trend for lenders that could point to a loosening of the fiscal conservatism that was a result of the recession. Scott Anderson, the chief economist at Bank of the West, told the source that consumers are becoming more comfortable holding credit. 

As a result of the recession, revolving debt fell more than 15 percent. Now, the Federal Reserve Board has reported a significant recovery, with revolving debt spiking more than 12 percent at an annual rate, reaching its highest point since October of 2008. 

While this is certainly exciting news for lenders, market experts are prescribing cautious optimism. Analysts at Nomura released a statement that was included by American Banker in their coverage.

"Although we're certainly not expecting consumers to go out and significantly re-lever their balance sheets, we do believe that consumer deleveraging is finally in the rearview mirror," the analysts wrote. 

The rebound is largely attributed to loosening of credit standards by issuing organizations. When the recession hit, standards became increasingly strict, frustrating many families and young professionals who found themselves denied access to credit. 

Now that consumer confidence is slowly returning, these spurned consumers are returning to investigate their credit options. And with the rise in demand, lenders and issuers may need to reevaluate their credit risk software to ensure all risks are managed effectively. 

Consumer credit practices have also changed in many ways. According to American Banker, consumers' propensity to revolve is at its highest level in 67 months. Kenneth Clayton, the executive director of the ABA's card policy council, argued that this is because consumers are using their cards as a transactional tool, in order to take advantage of increasingly popular rewards programs. 

In the future, these lowered credit standards could result in an increase of new borrowers unable to meet their obligations. The importance of identifying credit risk through thorough analysis of credit attributes is critical in rebuilding consumer confidence within the credit industry. 

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