Consumer use of credit cards ramps up, report finds – and banks are making the most of it

Credit cards are making a comeback as consumer use is ramping up – and banks focusing on credit cards are taking advantage, seeing a triple return on their investments, according to the 2017 credit card report issued by the federal consumer agency Wednesday.

The Consumer Financial Protection Bureau’s (CFPB) biennial report on the state of the credit card market – the third such report issued by the agency – found that the total amount of credit line, number of accounts, average amount of card debt, and enrollment in online services have all increased since the end of the economic turndown. According to the report, as of mid-2017, consumers held more than $4 trillion in card credit line, used or unused – which is just under the pre-recession high of $4.4 trillion in mid-2008.

New credit card accounts have jumped by about 50% since 2010 and – at 110 million new accounts – are higher than in any single year since the start of the economic downturn in 2007, the study found. “However, new account volume has not yet returned to the level it had reached in the years prior to the recession,” the CFPB stated in a release.

The CFPB report also noted that, along with the rising level of credit card use, credit lines, and accounts, consumer delinquency and charge-off rates, “which were high during the financial crisis and then fell to historical lows in the years following the recession,” have increased over the last two years.

Credit card banks, the study found, are performing well in the growth of use, lines and accounts: the average return on assets (ROAA) at credit card banks exceeded levels at commercial banks generally. “In fact, in 2016, large credit card banks had a return on credit card assets three times that of the overall return on assets for commercial banks,” the agency stated.

The agency said that the ROAA may explain growth in credit card offerings among community banks – which, in a survey, reported 60% were offering credit cards. “This is a sharp increase from the 51% identified in the prior year survey,” the report stated.

Additionally, the report states, 10% of community banks that do not offer credit cards plan to offer them in the future – while only one-half of 1% of banks that currently offer credit cards intend to limit their offerings or exit the market.

In other areas, the report noted that average debt of cardholding consumers overall has increased 9% over the last two years, and average balances for cardholders with low credit scores have increased at faster rates. “Cardholders with deep subprime scores, for example, have seen a 26% increase in their average credit card debt over the last two years,” the CFPB stated.

CFPB Releases Report on the State of the Credit Card Market