By CultureBanx Team
- Wells Fargo now keeping personal credit lines open between $3K and $100K
- 27% of Black households are late on paying their debts
In a sharp about face after plans to end personal credit lines, Wells Fargo (WFC +0.36%) will now keep the program open for its retail customers. With the golden age of plastic cards, more people are getting unsolicited access to additional credit from U.S. banks, putting even more pressure on Black households where more than 27% of them are late on paying their debts. As a country overrun by consumer debt, and Wells Fargo continuing its personal credit lines, could this be looming as the next major financial crisis?
Why This Matters: Credit card issuers like Wells Fargo have contingent liability of $4 trillion. That is almost four times the volume of outstanding debt in the U.S. This number heavily impacts people of color as Prosperity Now found in 2019, the Black median debt was about $30,800, compared to the White median debt of around $73,800. It’s all smoke and mirrors with these banks as credit limit increases are often touted as one way to help boost your credit score.
Wells Fargo is keeping lines of credit which include low-interest loans ranging between $3,000 and $100,000 open for those who already have an account, or want to reactivate an old account. The bank had stopped opening new credit lines for customers in May 2020. Credit cards have historically been banks’ highest-yielding loans. U.S. issuers pulled in $179 billion from interest and fees.
Herein lies the major problem attached to a personal credit line, generally the amount of credit a person uses and the credit card debt they carry increases in tandem, according to CNBC. However, sometimes a higher credit limit can be necessary for some people to make ends meet. Credit card borrowing has surpassed $880 billion. This makes it higher than its pre-crisis peak, according to the New York Fed’s consumer credit panel.
What’s Next: Wells has faced scrutiny from regulators since 2016 when news broke it was opening fake accounts to inflate sales numbers. The bank paid more than $3 billion to the government to settle the charges. Will you be opening a new personal line of credit?
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