Economic Gains Boost Lender Confidence and Increase Credit Availability in Third Quarter

Gains Occur Across All Risk Categories

​ Washington, DC. – The credit card market continued to gain strength in last year’s third quarter, with more new accounts and higher monthly purchase volumes across all risk categories, according to the American Bankers Association’s latest Credit Card Market Monitor.  These improvements come as the broader economy grew 5.0 percent in the third quarter of 2014 and 4.6 percent in the second quarter — the strongest six-month period of economic growth in over a decade.

The March 2015 Monitor, reflecting data from the third quarter of 2014, found that monthly purchase volumes increased across all risk categories, including a 5.2 percent uptick for sub-prime accounts, a 2.6 percent increase for prime accounts and 1.2 percent growth for super-prime accounts.  This rebound is consistent with the broader consumer picture at that time, with personal consumption expenditures growing 3.2 percent (nearly three times faster than in the first quarter of 2014) and retail sales continuing to improve.  In addition, both the number of new accounts and the average line of credit extended to those accounts increased across all risk groups.

“These findings reaffirm the important relationship between credit markets and the broader U.S. economy,” said Molly Wilkinson, executive director of ABA’s Card Policy Council.  “The market trends we’re seeing go hand in hand with a healthy economy as consumers continue to do a good job of managing their credit even as access to credit increases.”

Average Credit Lines Picking Up Steam
Among new accounts opened within the last 24 months, average credit lines increased across the board.  This is particularly true for new prime accounts, which grew 2.3 percent — the fastest rate in over six years.  Similarly, average credit lines for all accounts increased for both prime and super-prime accounts — the first time both have increased simultaneously in four years.  While average credit lines for all sub-prime accounts fell by 0.6 percent in the third quarter, average credit lines increased for sub-prime accounts opened in the last 24 months — the fourth such increase in the last five quarters.

“Both banks and consumers are feeling better about the state of the economy, and many lenders are gaining confidence in consumers’ ability to meet their financial obligations,” Wilkinson said.

Consumers Continue to Open New Accounts
New account volumes have steadily expanded across all risk categories over the last four years, including a 12.8 percent year-over-year expansion in the third quarter of 2014, and are now at their highest levels since the recession ended.  This growth has been fueled primarily by prime and super-prime accounts over the past five years, but growth in new sub-prime accounts is up 21 percent compared to the same period a year ago.

“Access to credit is important for both consumers and the broader economy,” said Wilkinson.  “These findings provide strong evidence that the market is growing in a healthy and sustainable way.”

The full report, including charts and detailed statistics, is available here.

About the Credit Card Market Monitor
The American Bankers Association Credit Card Market Monitor is a quarterly report that provides key statistics on industry trends and relevant economic factors affecting the industry.  The credit card data used in the report is taken from a nationally representative sample provided by Argus Information Services LLC.  Credit card data are presented as national averages for all accounts based on actual credit card account information.  No individual account holder’s information or specific financial institution’s data can be identified from the data set.  Other data used in the report are taken from various public and private sources, including the Department of Commerce’s Bureau of Economic Analysis and the Federal Reserve.

Answers to Frequently Asked Questions and definitions of the data presented in the ABA Credit Card Industry Monitor can be found in an Appendix attached to the monitor.

Results of this and all previous reports can be found at www.aba.com