CHICAGO– Credit card debt is now at a historical high, driven in part by Millennials further building on their credit portfolios, according to the newly released Q4 2023 Quarterly Credit Industry Insights Report (CIIR) from TransUnion.
“This comes at a time when an anticipated reduction in interest rates over the course of the coming year may open up new avenues to more affordable credit,” the company said in releasing the report.
According to TransUnion, bankcard balances reached a new record in Q4 2023, surpassing the $1-trillion mark for the first time on the back of 13% growth year-over-year (YoY).
The company said balances increased across all risk tiers, led by subprime, which grew 32% YoY to $105 billion.
Breakdown by Generations
TransUnion said its data show that generationally, the Gen X share of bankcard balances continued to be the largest (33.8%), while the Millennial share (29.4%), for the second straight quarter, surpassed that of Baby Boomers (26.7%). Millennials were the overall share leader in originations in Q3 2023, accounting for 29.6% of all new bankcard originations, the company added.
“Inflationary pressures and higher-than-expected living costs have led to many consumers turning to bankcards to help make ends meet in recent quarters, and Millennials are no exception,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “It’s worth watching how this generation uses credit in the coming year, one which will likely see some positive economic developments play out, but also challenges. Among these challenges will be the end of the one-year on-ramp to student loan payment resumption, something that may impact many consumers in this generational group.”
An ’Interesting Development’
Meanwhile, at the same time, Transunion said it found originations for both unsecured personal loans as well as home equity lending products were down YoY.
“This development is interesting as both products potentially offer consumers and homeowners lower-interest options to refinance high-cost credit card debt,” TransUnion said. “Unsecured personal loans in Q3 2023 were down 10% YoY, which is the fourth consecutive quarter of decreasing origination volume, as lenders show more scrutiny in their lending decisions and lenders in the FinTech sector face continued capital constraints. While home equity lending remains stronger than prior to the pandemic, both HELOC and HELOAN originations were down significantly YoY in Q3 2023 – reflecting declines of 29% and 8%, respectively – as more homeowners have been holding off from tapping into available home equity while interest rates remain high.”
Potential Opportunity
Raneri said that if, as expected, the Fed cuts interest rates this year, lenders may find opportunity as consumers carrying elevated card balances seek to lower their monthly payments by refinancing high-cost debt into a lower interest product.
Additional Findings
In addition, the company said credit balances continue to rise as TransUnion’s Credit Industry Indicator (CII) fell to 107 in Q4 2023, its lowest since Q1 2021, just before the post-pandemic surge in credit usage.
“Multiple factors played a role in this drop, including slowing new credit demand and supply as well as rising delinquency rates,” TransUnion said. “The CII is a quarterly measure of depersonalized and aggregated consumer credit health trends that summarizes movements in credit demand, credit supply, consumer credit behaviors and credit performance metrics over time into a single indicator. Examples of data elements categorized into these four pillars include: new product openings, consumer credit scores, outstanding balances, payment behaviors and more than 100 additional variables. Increases in the CII level indicate overall positive trends in the health of the credit market.”
For far more additional detail, go here: Q4 2023 Quarterly Credit Industry Insights Report webinar.
The Ideal Gift For Yourself or a Loved One This Valentine’s Day!
The biggest, best and freshest news reporting in credit unions remains free! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So stop paying those bank-fee-like subscription prices from other so-called “news” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?