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Stalled job growth contributes to Q1 slowdown in credit card use

August 1, 2019

Credit card use slowed down in the first quarter of 2019, according to the American Bankers Association's latest quarterly Credit Card Market Monitor, which provides key statistics on industry trends.

"Weaker consumer spending and slower monthly job growth likely contributed to modestly lower monthly purchase volumes," Dan Smith, executive director of ABA's card policy council, said in a press release. "Issuers are also continuing their cautious approach in extending credit." 

Compared to the previous quarter, seasonally adjusted purchase volumes declined across risk tiers. Compared to year-ago levels, purchase volumes rose  5.2% for super-prime, 4% for subprime accounts and remained essentially unchanged for prime accounts.

The August 2019 monitor, which consists of credit card data from January through March 2019, also found that the total number of credit card accounts climbed a modest 1.9% compared to a year ago, mostly due to growth in super-prime accounts, which have increased for 14 consecutive quarters and remain at record-high levels. 

The number of new credit card accounts — those opened in the last two years — fell by 5% on an annual basis, driven by sharp year-over-year declines in new subprime (-10.3%) and prime (-7.5%) accounts. 

Average credit lines for all accounts increased modestly across risk tiers compared to last year's Q4, but remain well below recession-era peaks. Meanwhile, credit lines for new accounts were mixed, with credit lines for super-prime accounts falling 1.5% on a quarterly basis (their sharpest decline since 2012) while subprime credit lines increased modestly.

The report also found that credit card debt as a share of disposable income eased 3 basis points to 5.40% in Q1 — essentially unchanged over the last five quarters and equivalent to levels from early 2013. 

"It is encouraging that credit card debt relative to income levels has remained low and steady as the economic expansion enters its 11th year," added Smith. "Consumers continue to be well-positioned to meet their financial obligations."

Meanwhile, the effective finance charge yield, which measures interest payments relative to total outstanding credit in the market, climbed to 13.33%. The effective finance charge yield has increased 224 basis points since late 2015, nearly identical to the 225-basis point increase in the federal funds rate over the same period. 

"The Fed's benchmark rate is an important factor in determining interest rates, along with broader economic conditions and market trends," said Smith. 

The share of revolvers (those who carry a monthly balance) increased 0.1% point to 44.5%, while the share of transactors (those who pay their monthly balance in full each month) fell 0.3 percentage points to 30.1%, but remains near its highest level in more than a decade.