Credit Card Use Expands in Fourth Quarter

Credit card use picked up in the fourth quarter of 2018, according to the American Bankers Association’s latest Credit Card Market Monitor released today. Monthly purchase volumes for both super-prime and prime accounts increased from the third quarter, but they moderated for subprime accounts. Year-on-year, purchase volumes were up across all risk tiers. Notably, subprime monthly purchase volumes increased 9.1%, while super-prime purchase volumes rose 8.6%.

The total number of new accounts (opened in the previous 24 months) fell 4.9% year-on-year, reflecting sharp decreases in new subprime and prime accounts. New super-prime accounts held steady, and remained near post-recession highs. The total number of credit card accounts ticked up 1.5% year-on-year, driven mostly by the super-prime risk tier. Average credit lines grew across risk tiers, but remain well beneath recession-era highs.

“Consumers continue to exhibit good payment behavior overall, and issuers are responding by slowly increasing credit lines,” said ABA Chief Economist James Chessen. “At the same time, issuers are slowing the pace of new account generation, particularly for subprime and prime borrowers, as they continue to closely monitor economy trends and consumers’ financial health.”

Outstanding credit as a share of disposable income rose 8 basis points to 5.5% in the fourth quarter, reflecting seasonal spending patterns, but remains 5 basis points below the 2017 level. The share of account holders carrying a monthly balance rose 0.2%. The share of account holders who paid off their balance in full each month also rose by 0.2%, and reached its second highest level since 2008, reflecting sound financial conditions for many U.S. consumers. The share of dormant accounts fell 0.4 percentage points.