A record 196 million Americans held credit cards at the end of last year as issuers granted more non-prime users access, according to a recent TransUnion report.
A record 20.1 million credit card originations took place in the third quarter, the last time period where detailed records are available. Of those, 45 percent (9 million) were non-prime consumers, the highest rate since 2010.
Personal loan balances reached an all-time high of $167 billion in the fourth quarter of last year, according to the report. This growth was sparked by a nearly 24 percent year-over-year spike in the average new account balance to more than $7,100 in Q3 2021. TransUnion’s Credit Industry Indicator, which measures a consolidated view of the consumer credit market, increased by 16 points year-over-year in the fourth quarter of last year, driven by increases in consumer credit demand and supply along with other factors. The average balance per customer slightly increased in the fourth quarter to $5,103 but still remains below the pre-pandemic average of $5,818.
“The consumer lending market has returned to pre-pandemic levels, with balances even exceeding Q4 2019 numbers,” said Liz Pagel, TransUnion senior vice president and consumer lending business leader. “Strong origination volumes, especially in below prime segments, coupled with material balance growth is an indication of lender confidence in consumer financial health. While the increase in subprime originations has led to a slight increase in delinquencies, they still remain well below pre-pandemic levels, and delinquencies by risk tier remain fairly stable.”
According to TransUnion, card issues are increasing access and using it as a growth strategy to offset lower customer balances. “There was a great deal of uncertainty in the initial months of the pandemic, and many lenders opted to take a wait and see approach,” said Charlie Wise, senior VP of research and consulting at TransUnion. “Adding to the uncertainty was the jump in consumers in loan accommodation programs, and questions on how those consumers would perform once they exited those programs. Lending to below prime consumers was suppressed and financial institutions turned their focus to the prime areas of the market to help mitigate risk.”
Wise said lenders are likely to continue extending access to credit across the risk spectrum, including non-prime consumers, and origination volumes are expected to increase. He also anticipates credit growth will be strengthened in the wake of government stimulus checks, which injected excess liquidity into consumer accounts.