Consumer credit card growth, which has been on the decline for about three years, could be showing signs of life again, according to data Equifax Inc. released July 1.
The Atlanta-based credit bureau said new bankcard account originations increased 35% during the 12 months ended March 2011 and credit lines also expanded incrementally, although the firm did not say by how much. Equifax did not release the total number of new consumer credit card accounts issuers opened.
The increase in new card accounts is “a sign card lending competition is heating up,” Equifax said in a press release.
“Despite concerns of the economy relapsing, several current metrics indicate the credit cycle is stabilizing—even growing somewhat as consumer payment behavior improves,” Michael Koukounas, Equifax senior vice president of client services, said in a press release.
While account-originations may be on the rise, observers remain skeptical that overall consumer credit card borrowing, which generates the largest share of card issuers’ profits from revenues earned on interest rates, will increase anytime soon.
Total outstanding credit card debt has been declining for nearly three years, falling 18.9% in April, to $790 billion from $974 billion in August 2008, Federal Reserve Board data show. The last time the agency reported credit card debt at these levels was in 2004.
Consumers remain “extremely cautious” about adding to their overall debt burden as the economy remains lackluster, Patricia Sahm, managing director at Auriemma Consulting Group, tells PaymentsSource in an interview.
Consumers are spending less monthly on credit cards than they were before the recession struck and their outstanding credit card balances are lower, Auriemma data show.
In a study Auriemma conducted among 1,026 consumers in March, cardholders said they spent an average of $515.57 per month on their credit cards, down 10.6% compared with an average of $576.22 cardholders said they spent monthly in a similar study conducted in March 2006.
Among cardholders who carried a balance, respondents said their average outstanding credit card debt on the card they used most frequently was $1,952.08, down 24.5% from $2,584.20 four years earlier.
“For a broad swathe of consumers, the recession is not over,” Sahm says. “During the recession we saw a major shift in the way people used credit cards that caused them to pull back on credit card spending, protecting their credit lines for emergencies, while turning to debit cards for everyday purchases. Those habits have not shifted back to the way it was before the recession.”
