Credit Access Grows in Credit Card, Auto and Personal Loan Markets

2/28/2017 11:30 AM

Credit card balances saw significant growth in the fourth quarter of 2016, and personal loan activity, especially among Baby Boomers, also increased to end the year.


The number of consumers with a credit card balance in the fourth quarter last year reached the highest level since 2009 and total credit card balances are also at a record high, according to TransUnion’s latest Industry Insights Report.

Auto and personal loan balances also reached milestones in the fourth quarter, according to the report.

“The consumer credit market performed well at the end of 2016,” said Nidhi Verma, senior director of research and consulting in TransUnion’s financial services business unit in a news release on the report. “Total balances rose across every credit product in the fourth quarter following a strong shopping season. For the past several years, auto lenders have been responding to the pent-up demand in the subprime risk tier, and card issuers have been competing for share of wallet. Lenders are issuing more credit, and consumers are using that credit.”

Consumers’ credit card balances totaled $717 billion at the end of last year, according to TransUnion.

It also found that there were 139.2 million consumers with a credit card balance in the fourth quarter—a 4.4 percent increase, and the highest level since 2009.

“Total credit card balances are also at their highest levels since Q3 2009. The largest growth in credit card balances came from the subprime risk tier, where balances rose 10.8 percent between Q4 2015 and Q4 2016,” according to the news release.

The average credit card balance per consumer increased 2.8 percent to $5,486 in the fourth quarter compared to $5,337 at year-end 2015. Last year’s fourth-quarter balance is the highest level since it reached $5,609 in the fourth quarter 2010, TransUnion reports.

“The credit card business hit several milestones in the fourth quarter, as the number of consumers with a card balance rose to the highest level we’ve observed in seven years,” said Paul Siegfried, senior vice president and credit card business leader for TransUnion in the news release. “Driven by a strong holiday shopping season and a steep rise in consumer sentiment, total credit card balances increased 8 percent year-over-year and surpassed $700 billion for the first time. Originations continued to rise across all risk tiers, but subprime originations grew at a more moderate pace.”

TransUnion also reports the credit card delinquency rate was 1.79 percent in the fourth quarter 2016, which is 12.6 percent higher than the 1.59 percent rate reached in fourth quarter 2015.

Credit card originations, viewed one quarter in arrears to ensure all accounts are reported and included in the data, “grew 14.1 percent to 17.52 million in Q3 2016, up from 15.36 million in Q3 2015,” according to the news release. “Subprime originations grew at 8.6 percent year-over-year in the third quarter of 2016, compared to an average third quarter growth rate of 26.8 percent from 2013 to 2015.”

In the personal loan market, 15.82 million consumers had a personal loan in the fourth quarter last year and balances increased $14 billion, to $102 billion, between year-end 2015 and year-end 2016.

The increase in balances marks the first time personal loans topped $100 billion, according to TransUnion.

Baby Boomers represented 32.8 percent of consumers with a personal loan in the fourth quarter, followed by Generation X at 31.6 percent and Millennials at 26.6 percent.

“There is a perception that personal loan growth has been driven by younger consumers, but our data clearly indicate that these loans are appealing to older borrowers,” said Jason Laky, senior vice president and automotive and consumer lending business leader for TransUnion. “We believe some of this growth is occurring because interest rates may be lower than for other types of credit for certain Baby Boomer segments.”

TransUnion also reports the personal loan delinquency rate, 3.83 percent, reached the highest fourth-quarter level since 2013. The personal loan delinquency rate in fourth quarter 2015 was 3.62 percent.

Personal loan originations, viewed one quarter in arrears, declined for the second quarter in a row from 3.75 million in third quarter 2015 to 3.54 million in third quarter 2016.

“We’ve observed a decline in non-prime lending that we attribute to mid-year FinTech funding challenges and regulatory uncertainty in advance of the election,” Laky said. “We believe that the personal loan market is stabilizing, and have seen balances grow across risk tiers through the end of the year.”

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