Card Market Continues Expanding, but Subprime Segment Lags

Strong holiday spending drove big fourth-quarter increases in credit card purchases by super-prime and prime borrowers, according to the latest edition of the American Bankers Association’s Credit Card Market Monitor released today. Monthly purchase volumes bounced up 5.1 percent for super-prime accounts in the fourth quarter and 3.9 percent for prime accounts — but they fell 3 percent for subprime borrowers.

A lag in new subprime accounts brought the total number of new accounts down by 1.3 percent in the fourth quarter, although new accounts were up 2.7 percent compared to the end of 2016. The total of all open accounts was 4.1 percent above the end of 2016. “The economy is performing well, and consumers are benefiting,” said ABA SVP Jess Sharp. “The strong labor market is helping to drive consumer confidence levels near all-time highs, and card issuers are responding by judiciously expanding credit access to new and existing customers.”

Outstanding credit as a share of disposable income increased 13 basis points to 5.73 percent, reflecting a seasonal uptick but remaining in line with post-recession lows. The share of account holders carrying a monthly balance ticked up 0.3 percentage points to 44 percent of all accounts, also remaining well below recession-era levels. “Consumers have worked hard to ensure credit card debt remains at manageable levels,” added Sharp. “Even as spending levels increase, credit card debt as a share of disposable income remains low by historical standards.”