Credit card market hits new milestones in 2016

The credit card business hit several milestones in the fourth quarter, as the number of consumers with a card balance rose to the highest level in seven years. Our TransUnion Q4 2016 Industry Insights Report found that the number of consumers with a credit card balance rose 4.4% in Q4 2016 to 139.2 million, and those card balances are at their highest levels since Q3 2009.

Driven by a strong holiday shopping season and a steep rise in consumer sentiment, total credit card balances increased 8% year-over-year and surpassed $700 billion for the first time. In addition, the average card balance per consumer grew 2.8% to $5,486. The largest growth in credit card balances came from the subprime risk tier, where balances rose 19.3% between Q4 2015 and Q4 2016.

Average consumer balance grew slightly, while aggregate balances grew consistently

Outstanding balances and average balance per consumer

Private label card use rose during the strong holiday shopping season, with Q4 YoY balance growth of 6.8%. Furniture, home improvement and jewelry continued to be the leading categories for private label card spending.

There was robust card balance growth in the 2016 holiday season, especially in big ticket categories of home improvement and jewelry

Private label card balances by merchant category

Originations continued to rise across all risk tiers

Credit card originations, viewed one quarter in arrears, grew 14.1% to 17.53 million in Q3 2016. Subprime originations grew 8.6% YoY in Q3 2016 compared to an average third-quarter growth rate of 26.8% from 2013 to 2015.

The consumer-level credit card delinquency rate reached 1.79% in Q4 2016, an increase of 12.6% from 1.59% in Q4 2015 and the highest Q4 delinquency reading since Q4 2011, when the delinquency rate stood at 1.90%. Still, the credit card delinquency rate remained more than a full point below its peak in Q4 2009 (2.97%).

Trends in the credit card market

*Note: Originations are viewed one quarter in arrears to account for reporting lag.
We observed a significant slowdown in the growth rate of originations to subprime consumers, which had been growing at double-digit rates every quarter for two years. This slowdown could signal lenders are evaluating their risk management strategies in light of the rising delinquency rate.

For more insight about the credit card market and consumer credit trends, download TransUnion’s Q4 2016 Industry Insights Report. You can watch the Q4 2016 Industry Insights Report webinar on demand and check out interactive data updated quarterly on the TransUnion Insights page.