ABA Report: Credit Card Market Continued to Normalize in First Quarter of 2022

Consumers continued to manage their credit well in the first quarter of 2022, a sign of continued U.S. consumer strength during that period, according to the American Bankers Association’s latest quarterly Credit Card Market Monitor released today. The report also found that credit card credit outstanding as a share of disposable income remained well below pre-pandemic levels in the first three months of the year, and inflation-adjusted monthly credit card purchase volumes eased across risk tiers (prime, subprime, and super-prime).

The August 2022 Monitor, which reflects credit card data from January to March 2022, shows that real monthly purchase volumes* eased 2–3% across risk tiers compared to the previous quarter, the first decrease in seven quarters. On an annual basis, purchase volumes increased 13-17% across risk tiers as inflation and economic recovery from the 2020 recession put upward pressure on consumer spending.

Credit card credit outstanding as a share of disposable income* continued to normalize in the first quarter, increasing to 4.72%, but remained well below its pre-pandemic level of 5.42%. Likewise, the effective finance charge yield (which measures interest payments relative to total outstanding credit in the market) increased to 12.10% from a four-year low as the Federal Reserve began raising interest rates.

“This new data indicates consumer credit use and credit access are slowly normalizing to pre-pandemic levels,” said ABA Chief Economist Sayee Srinivasan. “With a strong labor market and ample savings, consumers remained well-positioned to meet their financial obligations as the year began. Still, with high inflation and rising interest rates, it’s important for consumers to remain vigilant about keeping debt at manageable levels going forward.”

Other metrics featured in the Credit Card Market Monitor suggest that consumer credit conditions continued to normalize:

• The total number of accounts has nearly returned to its level in the first quarter of 2020, now with a higher share of super-prime accounts.
• New account creation** increased 6.4% on an annual basis, driven by subprime account openings. Though they are slowly recovering, new account openings remain 17% below pre-pandemic levels.
• Average credit lines for new accounts rose across risk tiers for the second consecutive quarter, led by prime and super-prime accounts. Among all accounts, the average credit line for prime and super-prime accounts also rose while subprime credit lines decreased a slight 0.2%.
• The share of cardholders who are Revolvers (those who carry over a monthly balance) increased to 40.9%, while the share of Transactors (those who pay their monthly balance in full) decreased to 35.5%, normalizing from a near-all-time high. Meanwhile, the share of Dormant accounts decreased by 0.1 percentage point to 23.7%.

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

*Seasonally Adjusted

**New accounts are defined as those 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.