Credit Card Data Shows Green Lights And Yellow

Credit card availability and use are on the rise. So are delinquency and charge-off rates.

 
 

By most major measures, good and bad, credit card use is on the rise in the credit union industry.

The good: More credit unions are offering credit cards and more of their members are using them. The not so good: Delinquencies and charge-offs are on the rise.

Although correlation doesn’t equal causation, any rise in bad loans in a credit card portfolio bears close monitoring, especially in boom times when a downturn could be around any corner.

 

 

First quarter delinquency and net charge-offs for credit cards was 1.24% and 2.87%, respectively, among the nation’s 5,646 credit unions. According to data from Callahan & Associates, those rates five years ago were 0.87% and 2.13%.

Also, whereas credit cards represented only 5.8% of the credit union industry’s total portfolio — $10.1 billion out of $983.3 billion — in the first quarter of 2018, they were responsible for 28% of total charge-offs. That’s up from 22.5% five years ago.

Click the tabs below to view graphs.

PERCENT OF CREDIT UNIONS WITH A CREDIT CARD

FOR U.S.a CREDIT UNIONS | DATA AS OF 03.31.18

Ten years ago, 51.1% of all U.S. credit unions offered credit cards. That’s risen 19.8% to 61.2%.

Source: Callahan & Associates.

CREDIT CARD PENETRATION

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.18

The percentage of members holding a card from their credit union that offers them has risen a full two percentage points, or 13%, in the past five years.

Source: Callahan & Associates.

CREDIT CARD DELINQUENCY AND NET CHARGE-OFFS

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.18

The net charge-off ratio for all U.S. credit unions has been creeping higher, at almost twice the rate as delinquent accounts.

Source: Callahan & Associates.

CREDIT UNION CHARGE-OFFS OVER TOTAL CHARGE-OFFS

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.18

The proportion of credit card charge-offs to total charge-offs has risen in the past five years and spiked to 28.1% in the first quarter of this year.

Source: Callahan & Associates.

CREDIT CARD UTILIZATION

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.18

Credit card utilization — the measure of how much members use their credit lines — has remained fairly steady for the past five years, including for fourth quarter holiday spending spikes.

Source: Callahan & Associates.

That uptick in troubled credit card accounts is occurring alongside such signs of growth as the fact that the average credit card balance in first quarter 2018 was $2,895 — up from $2,680 five years ago.

A higher proportion of credit unions also are offering credit cards: 61.2% of America’s credit unions offered credit cards as of March 31, 2018. That’s up 10.1 percentage points from 10 years ago.

That number might be rising because the number of credit unions is shrinking and those that survive are more likely to offer credit cards. To wit, among those credit unions that do offer credit cards, penetration is rising. As of March 31, 2018, the percentage of members that hold a credit union credit card was 17.3%. That’s an increase of two percentage points from five years ago.

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Despite the fact the average balance for credit cards is up, utilization is down. The utilization rate measures how much of their credit lines members, in aggregate, are using. The utilization rate was 31.1% as of March 31, 2018, versus 32.2% as of March 31, 2013.

Lower utilization could be the result of larger credit lines, restrained spending, or a combination of both. Regardless, it definitely shows that nearly 20 million credit union members that have a credit union credit card have another 68.9% of aggregate credit to spend.

That’s each member’s bottom line. The bottom line for credit unions is that credit cards as a product are profitable and growing, but credit unions should be aware of how increased delinquencies and charge-offs could affect members and the institution alike if there’s an economic downturn or even a recession.

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Aug. 7, 2018


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