Credit conditions in the second quarter point to a strong recovery from last year’s recession as U.S. consumer spending continued to expand, according to the American Bankers Association’s latest quarterly Credit Card Market Monitor released today. Monthly purchase volumes increased sharply from the first quarter, surpassing pre-pandemic numbers, while credit card debt as a share of disposable income remained well below historical levels.
The November 2021 Monitor, which reflects credit card data from April to July 2021, reveals that monthly purchase volumes* rose more than 13% across all three risk tiers (prime, subprime, and super-prime). At the same time, outstanding credit card debt measured as a share of disposable income* rose to 4.42% — its second-lowest reading on record — after falling to an all-time low in the first quarter.
“Overall, consumer financial health remained strong in the second quarter as the labor market expanded and consumer retail spending grew robustly,” said ABA Chief Economist and Head of Research Sayee Srinivasan. “The data suggest that consumers remained focused on keeping credit-card balances manageable and spending within their means.”
The share of cardholders who are Transactors (those who pay their monthly balance in full) rose by 2 full percentage points to 36.6%, an all-time high. Meanwhile, the share of Revolvers (those who carry over a monthly balance) fell by 2 percentage points to 38.5%, a record low. The share of Dormant accounts was unchanged at 24.9%.
Consistent with the declining share of Revolvers, the effective finance charge yield (which measures interest payments relative to total outstanding credit in the market) fell from 12.74% to 12.32% during the second quarter, its lowest reading since 2017.
The report also found that credit lines for new accounts continued to fall across risk tiers. Specifically, among accounts opened in the previous 24 months, super-prime credit lines fell 2.3% quarter over quarter while prime and subprime credit lines fell 3.8% and 4.9% quarter over quarter, respectively. On an annual basis, credit lines are down 16% for new prime accounts, 15% for new subprime accounts, and 13% for new super-prime accounts.
Credit card account creation remained measured as new account openings fell to a seven-year low. The subprime risk tier has led this decline, with new subprime account openings down 26% compared to a year ago. The subprime tier now comprises 15.9% of total open accounts, an all-time low, while super-prime accounts comprise 54% of all open accounts, near a record high.
“As the economy continued to normalize in the second quarter after last year’s COVID-induced collapse, consumers began to use their credit cards as they had before the pandemic,” said Srinivasan. “High-frequency data from the Fed shows credit card debt outstanding continues to normalize. In the near term, we anticipate that other credit card metrics, including revolver share and account creation, will also return to more typical trends.”
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 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.