The number of new credit card accounts (those opened in the previous 24 months) rose to 88.1 million, driven in part by a 16% increase in new subprime accounts. Even with this increase, subprime accounts continue to comprise roughly one-fifth of total open accounts — equivalent to 2012 levels.
According to the American Bankers Association’s latest Credit Card Market Monitor (4Q/16), the gains occurred across subprime (up 5.1%), prime (up 8.5%), and super-prime (up 9.7%) risk tiers.
Average credit lines also rose across risk tiers as last year came to a close. Among new accounts, super-prime cardholders saw the largest increase relative to the third quarter (up 2.7% to $10,202), while prime and subprime credit lines also increased to $5,571 (up 2.0%) and $2,536 (up 1.1%), respectively.
The ABA notes the unemployment rate has been below 5% for nearly a year, and wages continue to rise slowly. As a result, more Americans are in a better position to establish and build credit. Card issuers are working to serve these individuals, often easing them back into the market at lower credit lines that can rise over time with a good payment history.
The ABA report also found the share of accountholders who carry a monthly balance (“Revolvers”) rose 0.4 percentage points to 43.7% of all accounts. The share of accountholders who pay their monthly balance in full each month (“Transactors”) fell 0.1 percentage points to 29.1% of all accounts, while 27.2% of accounts were dormant.
Along with steady increases to the federal funds rate, the increase in revolvers is leading to a higher average effective finance charge yield (up 8 basis points to 11.47%). However, this metric — which measures interest payments relative to total outstanding credit in the market — has been mostly flat for the last five years and remains well below its high of 13.3% in early 2010.
Although monthly purchase volumes continue to rise across risk tiers, the data suggest that U.S. consumers are effectively managing their credit card debt. Measured as a share of disposable income, credit card credit outstanding ticked up to 5.46% due in part to seasonal factors, but remains near post-recession lows.