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|ABA Report: Credit Card Market Mirrors Solid Consumer Sector in Fourth Quarter|
|Wednesday, 04 May 2016|
WASHINGTON — Healthy consumer spending and continued labor strength were the driving forces behind a steady year-over-year increase in credit card use at the end of last year, according to the American Bankers Association’s latest Credit Card Market Monitor. Monthly purchase volumes rose 5.9 percent for subprime accounts, 3.0 percent for prime accounts and 3.1 percent for super-prime accounts in the fourth quarter compared to the same period a year earlier.
The May 2016 Monitor, which reflects data from last year’s fourth quarter, also found that the number of new credit card accounts jumped to 80.3 million — up 16.3 percent from a year earlier. New accounts experienced double-digit percentage growth for all three risk categories, including a 26 percent year-over-year increase in new subprime accounts. New subprime accounts continue to remain well below pre-recession levels. The steady growth in new accounts resulted in a post-recession high of 323 million total open credit card accounts, up 5.8 percent from a year prior.
“Recent growth in the credit card market largely mirrors what we’re seeing in the economy’s consumer sector,” said Jess Sharp, executive director of ABA’s Card Policy Council. “Labor markets continue to perform well, wages are slowly climbing and gasoline prices remain low — all of which translates into a healthier outlook for both consumers and the credit card market.”
Consumers Continue Disciplined Card Use
The ABA report also provides evidence that while consumers are increasingly using credit, they’re also continuing to spend within their means. The share of Dormant credit card accounts declined 0.7 percentage points to 28.1 percent of all accounts. This was offset by gains in both Revolver accounts (account holders who carry a monthly balance), which increased 0.4 points to 42.1 percent of all accounts, and Transactor accounts (account holders who pay their balance in full each month), which rose 0.3 points to 29.7 percent of all accounts. As a share of disposable income, credit card credit outstanding increased to 5.38 percent, but is still in line with historic lows.
“Even as consumers more actively use their credit cards, they continue to do a good job of managing credit to ensure they’re spending within their means,” said Sharp.
Issuers Work to Serve More Consumers
Consistent with recent trends, the report demonstrates how card issuers are managing risk while also expanding access to credit. Average credit lines rose markedly for new prime (+1.6 percent) and super-prime (+2.4 percent) accounts, while credit lines for new subprime accounts experienced slower growth (+0.4 percent). This reflects a recent market trend whereby issuers are extending credit to borrowers with lower credit scores or limited credit history — many of whom may have been unable to open a credit card account since the recession — but in smaller initial amounts that can increase over time with a good payment history.
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.
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