ABA: Record Number of Consumers Pay Off Credit Cards in Full as Spending Falls in Second Quarter 2020

As consumer spending contracted sharply and credit card purchase volumes fell across risk tiers in this year’s second quarter, the share of U.S. cardholders that paid their balance in full reached record levels, according to the American Bankers Association’s latest quarterly Credit Card Market Monitor.

The November 2020 Monitor, which reflects credit card data from U.S. cardholders from April through June 2020, found that the share of cardholders who are Transactors (those who pay their monthly balance in full) rose 0.6 percentage point to an all-time high of 32.2% and the share of Revolvers (those who carry over a monthly balance) fell 2.2 percentage points to 42.4%, the lowest level since the fourth quarter of 2015. Meanwhile, the share of Dormant accounts increased 1.7 percentage points to 25.5%. The increase in Transactors came during a quarter of severely curtailed economic activity, when monthly credit card spending* fell 25–30% across risk tiers.

The effective finance charge yield (which measures interest payments relative to total outstanding credit in the market) decreased 40 basis points in the second quarter to 12.55%. This movement reflects a decline in revolving accounts and the Fed’s decision to cut its benchmark interest rate to near zero. Meanwhile, credit card credit outstanding as a share of national disposable income* dropped 90 basis points to 4.50%.

“The share of those paying their monthly card balance in full rising to an all-time high is a positive indication that many consumers are better positioned to weather the economic downturn triggered by the pandemic than first expected,” said ABA Senior Economist Rob Strand.

The report also found that credit lines fell on a quarterly basis for both new and total accounts, particularly among prime accounts. However, total credit lines remained above year-ago levels across risk tiers, including subprime (+1.8% year over year), prime (+0.1% year over year), and super-prime (+1.3% year over year) accounts.

The number of credit card accounts fell on a year-over-year basis for the first time since 2012, driven by a 3.6% year-over-year reduction in subprime accounts and a 3.0% year-over-year decline in prime accounts. Among new accounts, volume fell across risk tiers, including subprime (-6.0% year over year; -13% quarter over quarter), prime (-4.4% year over year; -2.9% quarter over quarter), and super-prime accounts (-2.5% year over year; -1.5% quarter over quarter).

“While providing assistance to customers directly affected by the pandemic, banks are also taking a balanced approach to underwriting to ensure that credit lines match consumers’ ability to repay,” said Strand.

The full report with detailed charts and statistics is available here.

*Seasonally Adjusted

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.

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