Consumers continue to have a disciplined approach to spending with their credit cards, according to the American Bankers Association.
Credit card debt outstanding as a share of disposable income (often used to indicate consumers’ ability to repay their balances) increased 0.1% but the figure remains near historic lows.
The number of credit card accounts maintained its steady rise in the first quarter with new accounts across all risk categories growing 14% over the same period a year ago, according to an ABA news release on the Credit Card Market Monitor. Risk categories include subprime, prime and super prime, based on consumers’ credit scores.
The report, with data from the first quarter included, shows that the total number of accounts kept growing in all three risk categories - subprime, prime and super-prime - with the industry’s total of 314 million credit card accounts ranking as the highest mark since late 2008. While the growth has been driven by prime and super-prime accounts, the number of subprime accounts reached 60 million for the first time in more than three years, according to the news release.
"Banks continue to create opportunities across all categories with a prudent approach that opens the door for Millennials with no credit history as well as those who have had difficulty managing credit in the past," said James Chessen, ABA’s chief economist. "By offering lower initial credit lines that can increase over time with a good payment record, card issuers have responsibly expanded access to credit cards in a manner that benefits both consumers and the broader economy.”
The credit card market overall had a mixed performance in the first quarter, according to the Credit Card Market Monitor.
“Consumers remained well-positioned to pay off credit card debt, but spent less money using their cards—likely due to a combination of seasonal spending patterns and a temporary economic slowdown during the first quarter,” according to the report.
The distribution of accounts based on payment behavior type remained virtually unchanged.Revolving accounts, with some percentage of the monthly balance rolled over to the next month at least once per quarter, remained at 42.3% and dormant accounts with no activity during the quarter increased 0.3% to 28.8%. Transactors, who pay off their balance each month, fell 0.3% to 28.9%, according to the ABA.
Monthly purchase volumes declined approximately 8% across all three risk categories due to a combination of weak economic growth in the first quarter and normal seasonal purchasing patterns, according to the ABA. The U.S. economy grew at just 0.6% in the first three months of the year - a deceleration largely because of harsh winter weather, a strong dollar and port strikes on the West Coast - while monthly payrolls in the first quarter leveled off to slightly less than 200,000 per month.
“The weak economic conditions in the first quarter likely exacerbated the normal decline in credit card activity that occurs after the holiday shopping season,” Chessen said. “We’ve seen similar first-quarter declines due to these types of seasonal and one-off economic factors over the last few years. We remain confident that credit card markets will expand as the labor market tightens and gas prices continue to fall, which should drive up wages and spur consumer spending."