ABA Report: Credit Card Market Remained Strong but Softened Slightly in Second Quarter of 2022

Consumers continued to manage their credit well despite economic headwinds in the second quarter of 2022, according to the American Bankers Association’s latest Credit Card Market Monitor. The report found that credit card credit outstanding as a share of disposable income remained well below pre-pandemic levels in the second quarter while inflation-adjusted monthly credit card purchase volumes increased across risk tiers (prime, subprime, and super-prime), reflecting solid consumer spending earlier this year.

The December 2022 Monitor, which reflects credit card data from April to June 2022, shows that real monthly purchase volumes* increased 4–8% across risk tiers compared to the previous quarter. On an annual basis, real monthly purchase volumes increased 7–11% across risk tiers. Meanwhile, credit card credit outstanding as a share of disposable income* continued to normalize in the second quarter, though the second quarter reading of 4.8% remains well below average 2019 levels of 5.4%.

The effective finance charge yield (which measures interest payments relative to total outstanding credit) was essentially unchanged for the quarter at 12.1%, despite upward pressure from the Federal Reserve’s rate increases that began early in the second quarter. The effective finance charge yield decreased alongside the share of cardholders who were Revolvers (those who carried over monthly balances), which fell to 40.3% (from 40.9 %). At the same time, the share of Transactors (those who paid their monthly balances in full) increased to 36.1% (from 35.5%), near a series high. The share of Dormant accounts decreased by 0.1 percentage point to 23.6%.

“The Monitor indicates that consumer credit card use is continuing to normalize,” said ABA Chief Economist Sayee Srinivasan. “Rising interest rates and high inflation are putting pressure on consumer finances, but the labor market remains strong and consumer spending is holding up. Our data suggest that many consumers were in a position of strength as the first half of the year came to a close.”

Other metrics featured in the Credit Card Market Monitor suggest that consumer credit availability remains strong, as card issuers expanded access to credit in the second quarter.

• The total number of accounts rose 5%on an annual basis, and there are now more open accounts than at the beginning of the pandemic. The share of super-prime accounts remains near a record high, while the share of prime accounts is at an all-time low.
• New account creation** has nearly returned to pre-pandemic levels. New accounts increased 19% on an annual basis in the second quarter, driven by subprime account openings (which slowed sharply in 2020 and 2021).
• Average credit lines for new accounts rose across risk tiers for the third consecutive quarter, led by prime accounts. However, new account lines remain 5-13% below pre-pandemic levels.
• Among all accounts, average credit lines also rose across risk tiers. Credit lines for subprime accounts rose for the first time since before the onset of the pandemic, while credit lines for prime accounts have nearly recovered to pre-pandemic levels. Credit lines for super-prime accounts are now 2.4% higher than their level in the first quarter of 2020.

The full report with detailed charts and statistics is available here.

*Seasonally Adjusted

**New accounts are defined as those opened in the previous 24 months.

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 Verisk Financial | Argus. 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.