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Consumer credit card use reflects economic health

While credit card use saw a modest decline during the first quarter of 2018, card use across all risk tiers continues to rise in year-over-year comparisons, according to a report issued by the American Bankers Association. Since first quarter 2017, for instance, use of super-prime accounts increased by 8.9 percent, prime accounts increased by 6.2 percent, and subprime purchases grew 2.1 percent.

Jess Sharp, executive director of the ABA’s Card Policy Council attributed the trend to tax cuts and low unemployment. “Consumers are better positioned to manage credit, and card issuers are responding by increasing credit access,” Sharp said.

In the first quarter of 2018, average credit lines among all accounts rose across risk tiers compared to the previous quarter, but remain below recession-era highs. Additionally, credit card outstanding credit, as a share of disposable income, fell 21 basis points to 5.52 percent in the first quarter. The decline is reflective of post-holiday deleveraging.

The effective finance charge yield rose 27 basis points to 12.49 percent. This increase echoes the federal funds rate hike that occurred in December, the report stated.

The number of people who carry a balance on their credit cards rose slightly, up 0.8 percentage points to 44.8 percent while the number of people who pay their credit card balances in full each month remained unchanged at 29.5 percent. The number of dormant accounts fell less than 1 percent to 25.8 percent.

The ABA’s reports credit card data quarterly in its Credit Card Market Monitor using state from Argus Information and Advisory Services.