New Credit Card Accounts Jumped in 2016 Third Quarter
Feb 1st, 2017 @ 9:09 PM by Amber Nelson
American consumers took on more credit card debt and signed up for more cards in the third quarter of last year, according to a new report from the American Bankers Association.
The ABA’s January 2017 Credit Card Market Monitor – a report on credit card data from July to September 2016 – showed that the number of new credit card accounts increased 10.7 percent on an annual basis, by 87.3 million accounts. Subprime accounts –those where the borrower has poor credit – made up the fastest-growing segment with 27 million of the new accounts. While subprime accounts now make up 20 percent of all U.S. credit card accounts, that percentage is still far below pre-recession levels. Prime – good credit – accounts make up 29 percent of the credit card market and the remaining 50 percent are made up of super-prime – excellent credit – accounts.
“The U.S. economy is gaining strength, labor markets continue to firm and wages are up nearly 3 percent from a year ago,” said Jess Sharp, executive director of ABA’s Card Policy Council. “Consumers were the primary driver of economic growth in 2016, and growth in new credit card accounts and purchase volumes is in line with broader economic trends.”
Consumers spent more on their credit cards in the third quarter as well, with monthly purchase volumes rising 6.2 percent for subprime borrowers, 6.9 percent for prime borrowers, and 8.4 percent for super-prime customers.
At the same time more consumers kept a monthly balance instead of paying their bill off in full each month. The percentage of those with a monthly balance – called “Revolvers” – rose 0.8 percent to 43.3 percent of all accounts, a level not seen since 2013.
Still, consumers seem to be managing their credit card debt well overall. Individual credit card debt on average made up 5.29 percent of the account holder’s disposable income, a figure that remains near post-recession lows.
Sharp added,“The financial health of consumers has improved, consumer confidence is high and credit card debt is stable relative to income.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.