Callahan & Associates’ FirstLook program is underway, and credit unions can now view the fourth quarter performance data of more than 2,500 credit unions representing more than 50% of the industry’s total assets. Seventy-five percent of FirstLook credit unions report offering credit cards; that’s up from 71% in December 2008. FirstLook credit unions added more than 724,000 new credit card accounts during the past 12 months, and the total number of credit card accounts topped 9.1 million in the fourth quarter. Total outstanding credit card balances increased 9.9% year-over-year and hit $27.3 billion. 2013 marks the highest year of annual credit card loan growth since the recession.
An improving economy and rising consumer confidence contributed to an increase in member demand for and use of credit cards. The 8.9% annual growth rate for the number of credit card accounts more than doubled the 3.8% annual membership growth rate. Accordingly, credit card penetration — the percentage of members holding credit card accounts at credit unions — also increased. Credit union credit card penetration has risen 75 basis points over the past year and topped 16.9% as of December 2013. Credit unions have posted year-over-year increases in credit card penetration since 2011, suggesting the opportunity for continued organic growth within existing member bases.
CREDIT CARD PENETRATION
Data as of December 31 for FirstLook credit unions
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Source: Callahan & Associates’ Peer-to-Peer Analytics
Members are not only opening but also using their credit cards. As such, the average credit card balance — the total outstanding credit card balances divided by the total number of credit card accounts – is also increasing. The average credit card balance in the fourth quarter of 2013 was $2,980. That’s up from $2,944 in 2012 and $2,665 in 2008. Credit unions’ attractive product offerings — such as better rates and lower fees — encourage members to use their credit union credit cards. They also encourage members to carry higher balances. As of December 2013, members were using 34.2% of their available credit versus the 31.7% they were using in December 2008.
Given the rising importance of credit cards in the industry’s loan portfolio, it is not surprising credit card concentration also increased. Credit card concentration rose six basis points annually to 7.2% in the fourth quarter.
Credit card asset quality has improved notably for FirstLook credit unions during the past year. Credit card delinquencies at credit unions dropped one basis point annually to 96 basis points as of December 2013. Credit card charge-offs also fell 29 basis points annually to 194 basis points in the fourth quarter.
Rising credit card balances, increasing penetration rates, and improving asset quality all suggest credit unions are strengthening their position in the credit card space. Credit cards are becoming an essential lending product; as such, it seems worthwhile for credit unions to evaluate their credit card programs to ensure continued, strong growth in the coming years.