Credit availability for credit cards is finally easing up. A new study found that credit lines are contracting at their slowest rate in a year, with average credit lines for sub-prime and prime accounts (down 1.2% and 1.4% respectively) continuing to contract at a faster rate than super-prime accounts (down just 0.3%).
The American Bankers Association Credit Card Market Monitor research found the share of cardholders who are transactors (those who pay off their balances in full instead of carrying a balance forward) increased from 28.6% to 29%, the highest share on record. The share of cardholders carrying a balance (revolvers) ticked down 0.1% to 41.7% of all accounts, while dormant accounts fell from 29.7% to 29.3%.
The study also found that credit card debt as a share of disposable income dipped to 5.2% – the lowest level in more than a decade as credit cards become a payment tool rather than a debt instrument for an increasing number of consumers.
Moreover, credit card credit as a share of GDP and personal consumption has declined steadily since 2008. Both ratios are at their lowest point on record – 3.9 percent and 5.6 percent, respectively.
Additionally, the report found that the credit card market is shifting toward rewards cards. From Q4 2008 to Q4 2013, the number of active rewards cards has increased by 18.4%, while the number of active non-rewards cards has declined 40.6%. Over the same period, the number of new rewards accounts has increased 11.2% while new non-rewards accounts declined 51.3%. In addition, total spending on rewards cards was up 47.2%, while total spending on non-rewards cards fell 35%.
The full report, including charts and detailed statistics, is available here
The American Bankers Association Credit Card Market Monitor is a quarterly report that provides key statistics on industry trends and relevant economic factors affecting the industry. The credit card data used in the report is taken from a nationally representative sample provided by Argus Information Services LLC. Credit card data are presented as national averages for new accounts less than 24 months old based on actual credit card account information. No individual account holder information or specific financial institution data can be identified from the data set. Other data used in the report are taken from various public and private sources, including the Department of Commerce’s Bureau of Economic Analysis and the Federal Reserve.