Credit Card Market Continues to Grow as Economy is on the Upswing

11/2/2017 8:00 AM

Second quarter 2017 data show an increased use of credit cards among U.S. consumers who are prudently managing their credit card debt, according to a bankers’ association.


Credit card use continued to expand in the second quarter to a record of 91 million new accounts, 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.

“While the credit card market continues to expand, issuers appear to be tapping the brakes on new account creation for prime and subprime borrowers,” Jess Sharp, executive director of ABA’s Card Policy Council, said in a news release. “Issuers always look carefully at performance across all categories of borrowers to assess risk and determine the pace of credit card offerings.” 

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. 

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.

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