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ABA Report: Strong Job Gains Improving Purchase Volumes, Access to Credit and Ability to Pay Print E-mail
Thursday, 11 June 2015

WASHINGTON – The credit card market continued to grow in last year’s fourth quarter as new account growth accelerated and average credit lines increased for prime and super-prime borrowers, according to the American Bankers Association’s (ABA) latest Credit Card Market Monitor. 

Although economic growth slipped to 2.2 percent in the fourth quarter, credit card markets were likely helped by continued growth in employment as nearly one million jobs were added in October, November and December.

The June 2015 Monitor, reflecting data from the fourth quarter of 2014, found that monthly purchase volumes continued to increase for prime and super-prime accounts, but declined modestly for sub-prime accounts.

Growth in credit card accounts also picked up as the number of new accounts rose 14 percent compared to a year ago, driven mostly by gains in sub-prime and prime accounts.

“The credit card market continued to gain steam even as economic growth slowed at the end of last year,” said Molly Wilkinson, executive director of ABA’s Card Policy Council. “Looking ahead, steady employment gains and wage growth make it likely that credit card markets will continue to expand throughout 2015.”

Lower Levels of Credit Card Debt

Credit card credit outstanding as a share of disposable income inched down to a record low of 5.1 percent.  Further, a larger percentage of accountholders are actively using their credit cards.  The share of dormant accounts fell 0.9 percent to 28.5 percent in the fourth quarter, while the share of transactors and revolvers rose 0.5 percent and 0.4 percent, respectively. 

Transactors, who pay their balance in full each month, made up 29.2 percent of all accounts, revolvers accounted for 42.3 percent and 28.5 percent of accounts were dormant.

“More active credit card use suggests that consumers’ confidence in the future direction of the U.S. economy is on the rise,” Wilkinson said. 

Average Credit Lines Gain Momentum

The report also found that average credit lines for prime and super-prime accounts increased in the fourth quarter, consistent with recent trends.  Among accounts opened within the last 24 months, average credit lines increased 1.7 percent and 2.7 percent for prime and super-prime accounts, respectively.  Average credit lines continued to decline for higher-risk borrowers, falling 0.4 percent for new sub-prime accounts and 0.7 percent for all sub-prime accounts.

“Recent credit line increases for prime and super-prime cardholders show that lenders have become more confident in these borrowers’ ability to meet their financial obligations in an improving economy,” Wilkinson said.  “While average credit lines for sub-prime borrowers remain constrained due to both regulatory and economic factors, these customers continue to make up a growing share of new accounts.  Offering lower initial credit lines that can increase over time with a good payment record is consistent with a healthy consumer credit card market.”

(Source - ABA News Release)  

 

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