ABA found best-credit consumers boosted card spending in Q3

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    Staff Reporter
    Covering credit scores, personal finance and breaking news

    Consumers with best credit boosting their card spending in Q3, ABA says

    Super-prime
    accounts – those that consumers with the best credit hold – saw record purchase volume growth
    of 10 percent in the third quarter of 2018, according to the American Bankers
    Association.

    In
    its January 2019
    Credit Card
    Market Monitor
    , the ABA found consumers used their credit cards more
    during 2018’s third quarter, year-over-year.

    Purchase volumes for super-prime
    accounts grew significantly, increasing the strongest
    year-over-year in almost eight years. Purchase volumes for subprime accounts
    also rose, but they stayed the same for prime accounts.

    New account
    numbers rose, but more slowly

    The
    ABA data also showed that the total number of credit card accounts rose during
    the same period of time – from July through September 2019 – only more slowly
    year-over-year.

    Total
    new accounts, which the ABA defines as cardholders opening in the “previous 24
    months,” decreased almost 6 percent from just a year ago, with a serious
    downturn in consumers opening fresh prime and subprime accounts.

    Credit lines
    increased

    Although
    super-prime accounts’ average credit lines remained the same, prime and subprime
    average credit lines rose on a quarterly basis. New subprime accounts’ average
    credit lines rose by 2.4 percent from 2018’s second quarter. New prime
    accounts’ average credit lines fell by 0.9 percent and super-prime average
    credit lines fell by 1.2 percent since the second quarter. 

    “Consumer
    spending remains a major bright spot in the U.S. economy, and elevated consumer
    confidence levels coupled with stronger wage growth should keep spending
    healthy, at least through early 2019,” Jess Sharp, executive director of ABA’s
    Card Policy Council, said in a news release.

    “At
    the same time, there is evidence that issuers may be starting to pull back a
    bit. Tapping the brakes is an indication that issuers have their eye on the
    ball and are trying to help consumers continue to effectively manage their
    credit,” Sharp added.

    See related: Fed: Card balances jumped by $4.8 billion in November 

    Number of ‘transactors’ fell in third quarter

    The
    share of transactors – those who pay their balances in full each month – fell
    0.2 percentage point to 30.2 percent in 2018’s third quarter. However, 30.2
    percent is still the second highest number since 2008, when the ABA started tracking
    that data.

    Dormant
    accounts’ share fell to 25.6 in the third quarter as well, a 10-year low. And
    revolvers – those who keep a monthly balance on their cards – increased their share
    to 44.1 percent, a 0.4 percent increase from the second quarter.

    Interest payments relative to card debt rose slowly

    In
    quarter three, credit card credit outstanding as a share of disposable income ticked
    up to 5.42 percent (.04 percent), but has not grown a lot over the last six
    years and remains 2-3 percentage points below where it was before the Great Recession.

    In
    addition, the Fed’s
    interest rate increases
    have raised the effective finance charge yield – which
    shows interest payments relative to the market’s total outstanding credit. But
    the yield increased more slowly than the Fed’s rate – it rose by .24 percent to 12.8 percent in the third quarter. This might mean that as consumers better
    manage their credit card debt, it somewhat offsets interest rates that are
    creeping up.

    “Credit
    card interest rates are reflective of broader economic trends, including
    changes to the federal funds rate, so it is not surprising that the effective
    finance charge yield is rising,” Sharp said.



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