Credit Card Spending, New Accounts Surge in Fourth Quarter
May 10th, 2017 @ 9:05 PM by Amber Nelson
American consumers now carry a total of $779 billion in debt on their credit cards, with spending increasing across all credit-tiers, and yet experts say that debt is being managed pretty well.
During the fourth quarter of 2016, monthly credit card spending rose 5.1 percent among subprime borrowers on a yearly basis, according to the American Bankers Association’s Credit Card Market Monitor. It increased 8.5 percent for prime credit card holders and jumped 9.7 percent for super-prime borrowers.
Banks and other credit card lenders expanded the average credit line as well. Subprime borrowers saw an increase of 1.1 percent in the fourth quarter to an average of $2,536 while prime customers experienced a 2.0 percent increase to an average of $5,571. Super-prime cardholders had their limits jump 2.7 percent to an average of $10,202.
The number of credit card accounts also rose, with 88.1 million new accounts being generated in the past 24 months. Subprime accounts made up 16 percent of those new credit card originations.
Even as credit expands in volume and limits, the ABA believes consumers are doing well at managing their debt. Outstanding credit card debt made up just 5.46 percent of the average consumer’s disposable income.
Plus, almost a third of credit card holders pay off their balances in full each month. Another 27 percent of accounts are completely inactive, leaving 44 percent of borrowers who carry a balance from month to month.
“The unemployment rate has been below 5 percent for nearly a year, and wages continue to rise slowly,” said Jess Sharp, executive director of ABA’s Card Policy Council. “As a result, more Americans are in a better position to establish and build credit. Card issuers are working to serve these individuals, often easing them back into the market at lower credit lines that can rise over time with a good payment history.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.