Credit card use continued to expand in the second quarter, according to the American Bankers Association’s latest Credit Card Market Monitor. Monthly purchase volumes rebounded after a seasonal decline in the first quarter, rising by 9 percent across risk tiers. On an annual basis, purchase volumes rose 4.9 percent for prime accounts and 5.2 percent for super-prime accounts, but fell 1 percent for subprime accounts.
The October 2017 Monitor, which consists of credit card data from April through June 2017, also indicates that the number of new accounts (those opened in the previous 24 months) increased, but at its slowest pace since 2013 (0.2 percent quarter-over-quarter), reflecting subdued growth in new prime and subprime accounts.“While the credit card market continues to expand, issuers appear to be tapping the brakes on new account creation for prime and subprime borrowers,” said Jess Sharp, executive director of ABA’s Card Policy Council. “Issuers always look carefully at performance across all categories of borrowers to assess risk and determine the pace of credit card offerings.”
Consumers Continue to Manage Credit Well
The report also found that the share of “Revolvers” (those who carry a monthly balance on their card) declined 1 percentage point to 43 percent, its lowest level in a year. The share of “Transactors” (those who pay their monthly balance in full each month) rose 0.6 percentage point to 29.4 percent of all accounts, while 27.5 percent of accounts were dormant.
The effective finance charge yield — which measures interest payments relative to total outstanding credit in the market — rose 13 basis points to 11.88 percent, but remains well below recession-era levels. This increase is consistent with the Federal Reserve’s decision to raise the federal funds rate by 25 basis points in March.
Although credit card use is rising, the report found that consumers appear to be prudently managing credit card debt. As a share of disposable income, credit card credit outstanding rose 13 basis points to 5.46 percent in the second quarter following a seasonal decline in the first quarter. Despite the increase, this metric remains well below pre-recession levels and has hovered below 5.5 percent since 2012.
“Recent growth in the credit card market mirrors improvements in the overall economy,” Sharp said. “Consumer confidence is elevated, unemployment is at a 16-year low, and wages are rising — all positive signs for consumer financial health. Consumers remain well-positioned to manage their credit card accounts and build credit.”
The full report with detailed charts and statistics is available here.
About the Credit Card Market Monitor
The American Bankers Association Credit Card Market Monitor is a quarterly report that provides key statistics on industry trends and relevant economic factors affecting the industry. The credit card data used in the report is taken from a nationally representative sample provided by Argus Information Services LLC. Credit card data are presented as national averages for all accounts based on actual credit card account information. No individual account holder’s information or specific financial institution’s data can be identified from the data set. Other data used in the report are taken from various public and private sources, including the Department of Commerce’s Bureau of Economic Analysis and the Federal Reserve.
Answers to Frequently Asked Questions and definitions of the data presented in the ABA Credit Card Industry Monitor can be found in an Appendix attached to the monitor.
Results of this and all previous reports can be found at www.aba.com.