Credit card use rebounded in the second quarter after easing in the first quarter of 2019, according to the American Bankers Association’s latest quarterly Credit Card Market Monitor. Seasonally adjusted purchase volumes increased across risk tiers compared to the first three months of the year, reflecting robust consumer spending. Purchase volumes increased on an annual basis as well, with spending for subprime (+5.5 percent) and super-prime (+5.3 percent) accounts growing moderately while prime account spending rose modestly, increasing 1.6 percent.
The November 2019 Monitor, which consists of credit card data from April through June 2019, also found that the number of new accounts (those opened in the previous 24 months) decreased 2.5 percent compared to a year ago, the sixth consecutive annual decline. This decline was driven by drops in new subprime (-6.1 percent) and prime (-8.4 percent) accounts, both falling to their lowest level in roughly four years. The total number of credit card accounts rose 2.5 percent compared to year-ago levels, driven by the 15th consecutive quarterly increase in super-prime accounts. Meanwhile, the share of subprime accounts relative to total accounts fell to its lowest level in nearly four years.
“Consumer spending rebounded in the second quarter, and low unemployment and solid wage growth should keep consumers on solid footing through the end of 2019,” said Dan Smith, executive director of ABA’s Card Policy Council. “At the same time, new account generation is moderating in the prime and subprime risk tiers as issuers take a more cautious approach as they monitor economic data.”
Consumers Are Well-Positioned to Continue Responsible Credit Card Use
During the second quarter, Transactors (those who pay their monthly balance in full each month) rose 1.0 percentage point to 31.1 percent — the highest level since ABA began tracking this metric in 2008 — while Dormant accounts edged up 0.3 percentage points. The share of Revolvers (those who carry a monthly balance) fell 1.3 percentage points to 43.2 percent, the lowest level in two years.
The effective finance charge yield (which measures interest payments relative to total outstanding credit in the market) fell 12 basis points to 13.21, the first quarterly decline in nearly four years. This movement was not caused by recent Fed decisions to cut the federal funds rate (as these moves occurred in the third quarter), but rather reflect the decline in the share of revolving accounts. Meanwhile, credit card debt as a share of disposable income (seasonally adjusted) edged up four basis points to 5.33 percent (revised) in the second quarter — equal to year-ago levels and essentially unchanged over the past six years.
“Credit card debt remains quite low relative to income,” added Smith. “Consumers appear to be well-positioned to meet their financial obligations in the months ahead.”
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.