On December 27, 2017, the CFPB released its biennial report on the state of the credit card market. The CFPB’s report found the market to be stable and growing steadily. In particular, the Bureau found that the cost of credit card credit to consumers remains stable overall, in terms of both total costs and the structure of those costs. Some trends noted in the report include the growing use of secured credit cards – which require a cash security deposit and are often used by consumers to build credit history – and the significant proportion of consumers who are interacting with their credit card accounts online and through mobile applications. The report does not make specific recommendations or signal any intent by the CFPB to pursue major regulatory initiatives with regard to credit cards.
The report’s findings included the following.
- Card costs remain stable: Consistent with its previous biennial credit card reports, the CFPB’s report discussed costs to consumers in terms of a total cost of credit (“TCC”) metric first used in the Bureau’s 2013 report. The report found that in 2015 and 2016, TCC remained “broadly stable” for network-branded and private label credit cards overall. The report noted an exception in the case of interest rates on variable rate accounts, which it attributed to increases in background index rates over the past two years. The overall composition of consumer costs remained “stable” as well, with 18% of TCC consisting of fees and 82% consisting of interest charges. The Bureau’s previous 2015 report had found 20% and 80%, respectively.
- Total amount of available card credit lines has increased post-crisis: According to the report, consumers had more than $4 trillion in card credit lines as of mid-2017. This figure is the product of steady increases in total credit line – both overall and for every credit tier – since the end of the financial crisis of 2008–09. However, this total remains below the peak of $4.4 trillion in mid-2008.
- New credit card originations have increased by approximately 50 percent since 2010: The report found that consumers opened approximately 110 million new credit card accounts in 2016, roughly 50 percent higher than 2010 and a higher number than in any year since 2007. However, account originations have not yet returned to pre-crisis levels.
- Average credit card debt increased 9 percent over the last two years: According to the CFPB, the per-consumer credit card debt of cardholding consumers increased by 9 percent since the Bureau’s 2015 report. The report noted that average balances of consumers with “lower” credit scores (660 or below) have increased “substantially more” than they have for other consumers, with an increase of 26 percent in average balances for cardholders with “deep subprime” scores of 579 or less in the past two years.
- More than 60 percent of active credit card accounts are enrolled in online services: The report found that increasing numbers of consumers are engaging with their credit card accounts online, including by going online to track spending and pay their credit card bills. According to the Bureau, over 60 percent of active accounts issued by mass market issuers were enrolled in online account servicing portals in 2016. The report also found that one-fifth of active accounts in the CFPB’s data set were enrolled in smartphone-based account servicing applications; among the network-branded card accounts in the data set, one-third were enrolled in mobile servicing apps.
- Cardholding by consumers with lower credit scores remains below pre-crisis levels: The CFPB found that around 169 million consumers had at least one credit card open as of mid-2017, and the average number of cards held by cardholders has increased in recent years for all credit tiers except the report’s “superprime” tier (scores of 720 or greater). As a group, consumers with “higher” credit scores (above 660) have returned to pre-crisis rates of network-branded cardholding. However, the report noted that cardholding remains below pre-crisis levels among consumers with lower credit scores, despite “significant recent growth.”
- Secured card originations have increased significantly: Secured credit cards accounted for roughly 7 percent of all cards originated by consumers between the ages of 21 and 34. According to the CFPB, card issuers represented in the CFPB’s data set originated 7 percent more new secured cards in 2016 than in 2015. Much of this growth was attributable to consumers with lower credit scores; issuers originated roughly 25 percent of new network-branded secured cards to consumers with a deep subprime score or no score.