The news: Large banks grew their share of newly originated credit card accounts to subprime consumers (<660) during Q2 2026, per a report from the Philadelphia Federal Reserve.

Borrowers with credit scores below 660 accounted for 18.5% of all newly originated accounts last quarter.

Subprime credit card limits also rose faster than those of prime cardholders. 

The average credit card limit for subprime cardholders rose 20% YoY, while credit lines for cardholders with scores above 720 were flat. However, at just $600, low-score cardholders still have less access to credit than they did a decade ago.

How we got here: Banks tightened their lending sharply after the Federal Reserve started raising interest rates in 2022. This boxed out consumers with lower FICO scores from traditional lines of credit, pushing this demographic toward fintechs. More than 42% of consumers are unsure whether they would get approved for a credit card, even though actual rejection rates were far lower.

Implications for issuers: Bigger banks are giving higher-risk consumers more access to credit—albeit with a short leash. But as fintechs lean into this demographic, issuers need to offer subprime consumers a better value proposition for their loyalty. 

Rewards will remain the differentiator. Legacy providers have the firepower to offer rewards that fintechs can’t afford to match. Rotating rewards on the top categories that cardholders spend in is a strong feature to incorporate: 32% of survey respondents rated it as “extremely valuable”—and zero issuers currently offer the feature, according to our Cash-Back Credit Card Emerging Features Benchmark.

But banks aren’t exactly rushing into the subprime space—in Q2, just 11% of Bank of America’s credit card loans, for example, were held by customers with scores below 660, and likely an even smaller share of those consumers were subprime when they opened their account.

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