Survey: Credit card use fell along with growth in the first quarter

Credit card use fell during the first three months of the year, mirroring the contraction of economic growth during the period.  

The severe winter weather that weighed on economic growth during the January-March period also dented consumer spending, leading to fewer monthly purchases and lower credit lines, according to a new American Bankers Association’s survey released on Tuesday.


“The sharp economic contraction we saw during this year’s brutal winter also reverberated across the credit card market, with weaker consumer spending leading to a decline in credit card purchases,” said Kenneth Clayton, ABA’s executive vice president of legislative affairs and chief counsel.  

“The economy rebounded strongly in the second quarter and time will tell whether the card market will recover as quickly and robustly.”

The economy contracted 2.1 percent in the first quarter but picked up pace in the April-June period with a recent estimate showing that growth hit a 4.6 percent annual pace.

The study found that monthly purchases declined for all consumer categories.

Monthly purchases fell 8.4 percent for sub-prime accounts, 8.1 percent for prime accounts and 5.2 percent for super-prime accounts, all compared with the final three months of 2013.  

The drop in purchases coincided with weak consumer activity, particularly in January and February.

Retail sales contracted 1 percent on an annual basis in the first quarter.

Meanwhile, the total number of credit card accounts open increased to 330.0 million in the first quarter from 321.6 million in first quarter of 2013.

However, the number of open accounts is still 23 percent below the pre-recession peak of 427.4 million, the report said.

The study also shows that credit availability is slowly increasing for sub-prime credit, which makes up the largest share of new accounts (17 percent) since 2011, while being the small percentage of all open accounts.

“A slight increase in in sub-prime credit suggests that card companies see a long-term improvement in the U.S. economy, and are willing to assume slightly more risk in their portfolio,"  Clayton said.  

"However, it’s important to remember that the industry’s portfolio remains much more heavily weighted toward prime and super-prime accounts after the recession and regulatory changes that limit banks’ ability to manage risk.”