Credit conditions in last year’s third quarter reflected an ongoing economic recovery while credit card debt as a share of disposable income tilted slightly downward, according to the American Bankers Association’s latest quarterly Credit Card Market Monitor released today. Monthly purchase volumes grew across risk tiers during the third quarter, while average credit lines for prime and super-prime accounts rose for the first time since the pandemic began. Credit card debt as a share of disposable income fell slightly, nearing all time low, and remained well below pre-pandemic levels.
The February 2022 Monitor, which reflects credit card data from July to September 2021, reveals that monthly purchase volumes* rose 2-5% across risk tiers (prime, subprime, and super-prime) compared to the previous quarter. Purchase volumes were 25-30% above year-earlier levels, reflecting both robust consumer spending and a substantial decline in credit card use last summer and fall. At the same time, outstanding credit card debt measured as a share of disposable income* ticked down to 4.41%, its second-lowest reading on record.
“While purchase volumes surpassed pre-pandemic levels across risk tiers, the data show that overall consumer financial health remained strong in the third quarter,” said ABA Chief Economist and Head of Research Sayee Srinivasan.
The report also found that the share of cardholders who are Transactors (those who pay their monthly balance in full) fell 0.4 percentage point to 36.2% after hitting an all-time high in the second quarter. At the same time, the share of Revolvers (those who carry over a monthly balance) rose 0.9 percentage point to 39.5%, the measure’s second-lowest reading on record. The share of Revolvers is roughly five percentage points below its pre-recession level. Meanwhile, the share of Dormant accounts fell 0.5 percentage point to 24.4%, among the lowest readings on record.
The effective finance charge yield (which measures interest payments relative to total outstanding credit in the market) fell 22 basis points to 12.10% during the third quarter, its lowest reading in more than four years. This metric has fallen since 2019 as the share of revolving accounts declined but is expected to tick up as interest rates rise this year.
Credit card account creation** began to recover in the third quarter, with new subprime account openings rising by more than 12% compared to the previous quarter (though new prime and super-prime account openings dipped slightly). Compared to four quarters earlier, however, new account creation was down across the board, including -3.7% for subprime accounts, -9.4% for prime accounts, and -15.0% for super-prime accounts. The subprime tier comprised 16.5% of total open accounts, near an all-time low, while super-prime accounts comprised 53.5% of all open accounts, near a record high.
Meanwhile, credit lines for new accounts rose for prime and super-prime accounts for the first time since the onset of the pandemic. Among accounts opened in the previous 24 months, super-prime credit lines rose 2.6% compared to the second quarter, while prime credit lines rose 2.9%. Credit lines for new subprime accounts fell slightly (-0.3%) during this period. On an annual basis, credit lines are down 9% for new prime accounts, 13% for new subprime accounts, and 8% for new super-prime accounts.
The full report with detailed charts and statistics is available here.
*Seasonally Adjusted
**The number of new accounts opened in the previous 24 months
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 Verisk Financial | Argus. 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.