As the third major bank credit card issuer reports second quarter results more evidence American consumers are becoming more transactional with credit cards than using them for revolving credit access. Bank of America (BofA) posted a surprising sequential decline in U.S. bank credit card outstandings for the second quarter (Q2/14) while bank credit card Purchase Dollar Volume (PDV) posted a strong gain. Furthermore, U.S. debit card purchase PDV rose from 1Q/13.
BofA reported a decline of 1.8% in Year-on-Year (Y/Y) average U.S. bank credit card outstandings of $88.1 billion. End-of-Period (EOP) outstandings also declined 1.7% Y/Y to $89.0 billion. Quarter-to-Quarter (Q/Q), U.S. average bank credit card outstandings were down 1.6% and EOP outstandings declined 1.5%.
Meanwhile, PDV for BofA’s U.S. bank credit cards jumped 3.9% Y/Y and 9.6% Q/Q to $53.6 billion. BofA noted its U.S. debit card PDV also increased 2.7% Y/Y and 5.5% Q/Q to $69.5 billion.
BofA benefited greatly in Q2/14 from record low delinquency and charge-offs in its U.S. bank credit card portfolio.
The 30+ day delinquency rate for U.S. bank credit cardholders declined 52 basis points (bps) from Q2/13 and 23 bps from the prior quarter. For Q2/14, 30+ day delinquency stood at 1.91%, compared to 2.14% in Q1/14 and 2.43% in Q2/13.
The 90+ day delinquency rate also sank by 31 bps Y/Y and 12 bps Q/Q to 0.98%.
In another good sign, bank credit card charge-offs dropped a stunning 99 bps from the year ago quarter to 3.11%. Sequentially, charge-offs declined 14 bps.
BofA noted that credit card issuance remained strong with the company issuing 1.1 million new credit cards in the second quarter, up 18% from the year-ago quarter. Approximately 65% of these cards went to existing customers.
Additionally, BofA reported its gross interest yield dropped 50 bps from Q2/13 to 9.30%. But, the risk-adjusted margin rose 56 bps to 8.97%.
RAM Research projects BofA’s U.S. bank credit card PDV and debit card combined PDV will exceed $140 billion in the third quarter.
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