Consumers turn to credit cards, home equity to maintain financial stability

Consumers are continuing to look to credit to ease the financial pressures of high inflation and rising interest rates, according to the recently released Q4 2022 Quarterly Credit Industry Insights Report by TransUnion. Credit card balances continued to grow, reaching record levels at the end of 2022. Bank card originations rose from 20.1 million in Q3 2021 to 21.6 million in Q3 2022, the most recent originations data available. Gen Z consumers in particular increasingly turned to bank cards, showing year-over-year growth in both balances (up 64% in Q4) and originations (up 188% in Q3).

TransUnion said one “somewhat concerning” development was an upward trend in credit card delinquencies in both bank cards and private-label cards. However, it noted delinquencies for bank cards in Q4 still hovered around pre-pandemic levels observed in 2019, while private label card delinquencies remained below pre-pandemic levels.

Higher interest rates dampened new and refinance mortgage originations in Q3. Still, homeowners continued eagerly tapping into their record stores of home equity to help in consolidating their high interest debt, according to TransUnion. HELOCs and home equity loans continued to be a popular option. Consumers were also still seeking out unsecured personal loans as a way to pay off high interest debt and, despite growing delinquency rates among borrowers, lenders remained eager to lend, although with adjustments in their lending criteria that included a gradual shift away from below-prime borrowers.