Credit card purchase volumes fell in the first quarter of 2020 as the economy entered its first recession in a decade, according to the American Bankers Association’s latest quarterly Credit Card Market Monitor. In line with the onset of the pandemic-induced economic downturn and prior industry reports, seasonally adjusted monthly purchase volumes pulled back from the previous quarter, with monthly credit card spending declining 2.3% for both super-prime and prime accounts and falling 1.5% for subprime accounts. Year-over-year purchase volumes were up moderately for prime (+5.8%) and super-prime (+4.2%) accounts, while subprime purchase volumes grew at a 2.8% pace.
The share of Transactors (those who pay their monthly balance in full each month) eased 0.3 percentage point to 31.6% after hitting an all-time high in the previous quarter, while the share of Dormant accounts fell to 23.8%. Meanwhile, the share of Revolvers (those who carry a monthly balance) increased 0.5 percentage point to 44.6%.
“Consumers faced exceedingly challenging times amid an abrupt deterioration of economic conditions,” said ABA Senior Economist Rob Strand. “It is not surprising that consumers reduced their credit card spending compared to the previous quarter as they navigated substantial financial uncertainty stemming from the pandemic.”
The August 2020 Monitor, which reflects credit card data from January through March 2020 — the early days of the economic slowdown at the onset of the pandemic — also found that credit lines for new accounts fell across risk tiers compared to the prior quarter, driven by a 1.6% decline in super-prime credit lines. Credit lines for new prime accounts fells 1.0%, while lines for new subprime accounts fell 0.3%. Among all accounts, credit lines were generally unchanged for the super-prime and prime risk tiers and increased modestly for the subprime tier.
The effective finance charge yield (which measures interest payments relative to total outstanding credit in the market) inched up 6 basis points to 12.96% but remains 37 basis points below its year-ago level. This upward movement likely reflects a larger share of revolving accounts. Meanwhile, credit card credit outstanding as a share of disposable income (seasonally adjusted) decreased 10 basis points to 5.39%, mirroring March spending declines.
“While the recession was just getting underway in the first quarter, this data suggests that consumers were diligent about keeping their credit card payment obligations in line with their disposable income,” said Strand. “Although the future remains uncertain given widespread job loss, banks will continue to work with their customers and provide additional flexibility to help them manage their financial obligations through these difficult times.”
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.