The American Bankers Association’s latest Credit Card Market Monitor showed that credit card purchase volumes rose between 6 and 9 percent across risk tiers in the third quarter of 2016 as the economy strengthened.
The report also found that the number of new credit card accounts opened rose 10.7 percent year-over-year to 87.3 million. Subprime account openings added 27 million new accounts in the period, making it the fastest growing sector. However, it still lags prime and super-prime accounts, which make up 29 percent and 50 percent of the credit card market, respectively.
“The U.S. economy is gaining strength, labor markets continue to firm and wages are up nearly 3 percent from a year ago,” Jess Sharp, executive director of ABA’s Card Policy Council, said. “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.”
The number of credit card account holders who carry a monthly balance rose 0.8 percentage points to 43.3 percent. That represents the highest percentage since 2012.
The finance charge yield, which measures the amount of interest issuers are collecting relative to the total amount of outstanding credit, rose from 11.30 percent to 11.39 percent.
The share of account holders who pay off their balances in full each month fell 0.3 percentage points to 29.2 percent, but remained near a post-recession high.
Further, credit card credit outstanding as a share of disposable income remains near post-recession lows. It has not climbed above 5.45 percent or fallen below 5.15 percent in nearly five years.
“The financial health of consumers has improved, consumer confidence is high and credit card debt is stable relative to income,” Sharp said.