The credit card market continued to expand in the third quarter of 2017 as monthly purchase volumes edged up across risk tiers, according to the American Bankers Association’s latest quarterly Credit Card Market Monitor. On an annual basis, purchase volumes rose 3.3 percent for prime accounts and 4.3 percent for super-prime accounts, but fell 3.9 percent for subprime accounts.
The January 2018 Monitor, which consists of credit card data from July through September 2017, also found that the number of new accounts (those opened in the previous 24 months) increased at its slowest annual pace in over six years (4.9 percent year-over-year). Similarly, the total number of open credit card accounts rose 4-6 percent on a yearly basis in each of the first three quarters of 2017, falling short of 2016’s 8 percent average annual growth rate.
“As the economy continues to grow, consumers are enjoying historically low debt-to-income ratios and near-record confidence,” said Jess Sharp, executive director of ABA’s Card Policy Council. “Unemployment is down, wages are creeping up, and the passage of tax reform will put more money in people’s pockets. These trends are good for the economy, and will likely translate into increased consumer spending.”
Consumers Continue Disciplined Credit Card Use
Data from the third quarter also show that the share of Revolvers (those who carry a monthly balance) ticked up 0.7 percentage point to 43.7 percent of all accounts, but remain well below recession-era levels. The share of Transactors (those who pay their monthly balance in full each month) fell 0.3 percentage point to 29.1 percent of all accounts, while 27.2 percent of accounts were dormant.
The effective finance charge yield (which measures interest payments relative to total outstanding credit in the market) rose 26 basis points to 12.14 percent in Q3. This increase echoes the federal funds rate hike that occurred last June. In addition, credit card credit outstanding as a share of disposable income increased to 5.61 percent in Q3, but remains 2-3 percentage points below pre-recession levels.
“The rise in interest payments over the last few quarters is a predictable byproduct of the Fed’s efforts to normalize interest rates,” Sharp said. “Credit card balances remain low when compared to disposable income, which suggests that consumers are well-positioned to manage their accounts.”
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.