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ABA Report: Credit Card Market Expanded in Second Quarter


Credit card use picked up in the second quarter of 2018, according to the American Bankers Association’s latest quarterly Credit Card Market Monitor. Compared to a year ago, super-prime accounts increased 9.2 percent and prime accounts rose 6.6 percent, both record highs. Meanwhile, subprime purchase volumes expanded at a much slower pace (+3.0 percent) on a year-over-year basis.

The October 2018 Monitor, which consists of credit card data from April through June 2018, also found that the number of new accounts (those opened in the previous 24 months) decreased 3.5 percent compared to the same period a year earlier, reflecting a sharp drop in new subprime accounts. While the total number of open credit card accounts increased on a year-over-year basis, growth slowed to its weakest pace in more than five years. 

On a quarterly basis, average credit lines among all accounts continued to rise for super-prime accounts, but fell for both prime and subprime accounts for the first time in a year. The same trend emerged among new accounts, as average credit lines rose 0.2 percent for new super-prime accounts compared to the previous quarter, but fell 0.4 percent for new prime accounts and 1.3 percent for new subprime accounts.

“A strong economy, along with high confidence levels bolstered by more jobs and higher wages, continues to support healthy consumer spending,” said Jess Sharp, executive director of ABA’s Card Policy Council. “The industry continues its diligent approach to credit underwriting, which is reflected most recently in declines in average credit lines for prime and subprime borrowers.”

Consumers Are Well-Positioned to Manage Credit Cards

Credit card credit outstanding as a share of disposable income rose just 3 basis points to 5.36 percent in the second quarter, and remains more than 200 basis points below recession-era levels and hovers near post-recession lows.

“Consumers continue to keep credit card balances low relative to income, and are managing their credit cards prudently,” said Sharp.

Meanwhile, the effective finance charge yield (which measures interest payments relative to total outstanding credit in the market) rose 7 basis points to 12.56 percent in the second quarter, likely reflecting the federal interest rate hike in March.

“By design, the Fed’s actions to normalize interest rates over the past few years have slowly raised the cost of credit, which will affect all borrowers,” added Sharp. “This upward pressure will continue somewhat if the Fed raises rates further toward the end of this year or into next.”

The share of Revolvers (those who carry a monthly balance) fell 1.0 percentage point to 43.8 percent in the second quarter, while the share of Transactors (those who pay their monthly balance in full each month) rose 1.0 percentage point to 30.4 percent in Q2, reaching the highest level since ABA began tracking this metric in 2008. The share of Dormant accounts was unchanged at 25.8 percent.

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. The American Bankers Association is the voice of the nation’s $17.5 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $13.5 trillion in deposits and extend nearly $10 trillion in loans.

About the American Bankers Association

The American Bankers Association is the voice of the nation’s $18 trillion banking industry, which is composed of small, regional and large banks. Together, America’s banks employ more than 2 million men and women, safeguard $14 trillion in deposits and extend more than $10 trillion in loans.

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