New credit card accounts show rare decline, banks say

First dip in new cards in seven years led by subprime accounts

Fred O. Williams
Senior Reporter
Expert on consumer credit laws and regulations.

New credit cards fell in Q1 2018, banks say

The number of new credit card accounts took a rare dip in the American Bankers Association's report for the first quarter – caused by a drop in subprime cards.

It was the first drop in the new accounts figure in nearly seven years, the industry group's Credit Card Market Monitor report said. New accounts are those that have been opened within the previous 24 months.

The report only takes into consideration bank-issued cards, not store cards or private label cards, according to ABA.

The decline reflected a 6.3 percent drop in new subprime accounts, the report said. That drop put the brakes on an overall increase in the total number of open credit card accounts.

Credit card market slowing down?

  • New cards, open in last 24 months, show first decline in nearly seven years.
  • Overall growth in total card accounts slows to lowest level since 2012.
  • A total 366 million cards were open in the market in Q1 2018, versus 357 million in Q1 2017.

See related: Average card rate holds steady at 16.96 percent

"The total number of open credit card accounts expanded in the first quarter on a year-over-year basis, but at its slowest pace in over five years," the ABA said in a statement.

The report counts subprime as having a credit score below 680; prime scores are 680-759, and super prime is above 759.

There were 366 million open cards in the first quarter, up from 357 million a year earlier in the first quarter of 2017. Year-over-year comparisons help focus on underlying trends instead of seasonal swings.

Banks show optimism about card market

The industry group was upbeat about the card market, based on a solid economy and growth in jobs.

"Lower tax rates are putting more money in consumers’ pockets, and both consumer and business confidence remain elevated,” Jess Sharp, executive director of ABA’s Card Policy Council, said in a statement. While card balances are rising, they are down somewhat as a share of consumers' available income during the quarter.

ABA Chief Economist James Chessen said that cardholders are doing a good job of managing their obligations. Although total credit card balances have topped new heights as the economic expansion continues, the key measure of healthy household budgets is the debt relative to consumers' income.

"The most important thing to me is credit card [debt] outstanding as share of disposable income," Chessen said, "which has been remarkably flat for four or five years now."

The robust job market has pulled people back into the card market, which has propelled growth in accounts across the board for years. The slowing growth in card accounts now, "I think is a reasonable thing to expect," he said.

"Lower tax rates are putting more money in consumers' pockets, and both consumer and business confidence remain elevated."

Other trends in the credit card market from the industry report

  • Monthly purchase volume was up year-over-year, with super prime accounts up 8.9 percent, prime up 6.2 percent and subprime up 2.1 percent
  • The average credit line for accounts opened within the past 24 months was $10,412 for super prime, $5,724 for prime, and $2,643 for subprime.
  • Accounts that carry a balance, also known as “revolvers,” were 44.8 percent of all accounts.
  • Convenience users who pay their balance in full, otherwise known as “transactors,” represented 29.5 percent of accounts. 
  • Another 25.8 percent of accounts were dormant.
  • The total number of 366 million open credit card accounts represents 185 million super prime accounts, 105 million prime, and 76 million subprime.

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Updated: 02-17-2019