The opening quarter of 2017 saw an uptick in credit card usage, continuing a long-running trend in the financial marketplace, according to the latest American Bankers Association (ABA) Credit Card Market Monitor report.
The report includes a series of graphs representing data on purchase volumes of various credit card account types, behaviors governing consumer spending habits and recent finance charge yields.
Although monthly purchase volumes declined 7–10 percent across risk tiers compared to the previous quarter, they increased 3.3 percent on a year-over-year basis for prime and super-prime accountholders, dipping slightly for subprime borrowers. The ABA, in a press release, characterized the decrease as “regular” for the quarter following the holiday season, with relatively low consumer spending.
The report also indicates that the number of accounts opened in the previous 24 months rose 8.8 percent in the first quarter compared to the same period in 2016. New subprime accounts grew the fastest among the three risk tiers, rising 11 percent year-over-year; however, they make up the smallest share of total accounts created. New prime and super prime accounts each grew by 8 percent compared to the same period of the previous year.
“A stronger labor market continues to serve as a bright spot in the U.S. economy, putting more Americans in a better position to establish and build credit,” ABA Card Policy Council Executive Director Jesse Sharp said in the release. “Issuers are responding to consumer demand by extending credit access to more people, but at lower credit lines that can increase over time with a good payment history.”
The effective finance charge yield, measuring interest payments relative to total outstanding credit in the market, increased 28 basis points to 11.76 percent, compared to the previous quarter, which is consistent with the Federal Reserve’s decision to raise the federal funds rate by 25 basis points at the end of 2016, the report notes.
“Market interest rates on loans tend to mirror what the Federal Reserve does, as the Fed’s goal is to tighten credit ever so slightly,” Sharp said. “Nonetheless, the effective finance charge is likely to remain well below post-recession highs this year.”
The percentage of consumers commonly characterized as “revolvers” (those who carry a monthly balance on their card) increased 0.3 percent in the first quarter to 44 percent.
The ABA noted that revolving accounts typically increase in the first quarter as a result of seasonal spending patterns. The organization also noted that the current share remains below the 2009 recession peak of 48.4 percent, and that the share of accountholders who pay their balance in full each month, sometimes classified as “transactors,” dropped 0.3 percent to 28.8 percent of all accounts. Meanwhile, 27.2 percent of accounts were dormant.
As a share of disposable income, credit outstanding declined 13 basis points to 5.3 percent in the first quarter, and has remained below 5.5 percent since 2012, representing responsible payment behavior by consumers, the ABA stated.
The July 2017 report reflects credit card data from January through March 2017, as well as annualized data showing ongoing trends. It is intended to provide key statistics on industry trends and relevant economic factors affecting the industry, using credit card data taken from a nationally-representative sample provided by Argus Information Services LLC, as well as data taken from numerous public and private sources, including the Department of Commerce’s bureau of economic analysis and the Federal Reserve, according to the release.
The report includes an attached appendix with answers to frequently asked questions and definitions of the data presented.