Consumer credit conditions remain strong as market normalizes 

Consumer credit conditions remained strong in the second quarter of this year as numbers continued to revert to pre-pandemic averages, according to the American Bankers Association’s second quarter Credit Card Market Monitor.  

The total number of accounts opened increased 5 percent on an annualized basis, bringing the number of open accounts higher than at the start of the pandemic. According to the report, which covered data taken from April to June, new account creation has nearly returned to pre-pandemic levels after an increase in subprime account openings fueled a 19 percent annualized rise in the second quarter. 

 Credit outstanding as a share of disposable income continued to normalize in the second quarter, according to the report, but the second quarter reading of 4.8 percent remains below the average of 5.4 percent in 2019. Inflation-adjusted monthly credit card purchase volumes increased for prime, subprime and super-prime risk tiers. The share of super-prime accounts remained near a record high, according to the report, while the percentage of prime accounts is at a historical low.

Interest payments relative to total outstanding credit was “essentially unchanged” at 12.1 percent in the second quarter, according to the report. The share of cardholders who carried monthly balances fell to 40.3 percent from 40.9 percent during the first quarter. The share of consumers who paid their monthly balances in full increased to 36.1 percent from 35.5 percent.   

Average credit lines for new accounts increased across risk tiers for the third straight quarter but remained 5 to 13 percent below pre-pandemic levels. According to the report, real monthly purchase volumes grew 4 to 8 percent across risk tiers from the previous quarter and 7 to 11 percent on an annualized basis.  

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