CHICAGO–With inflation remaining high and interest rates having risen quickly, consumers are increasingly turning to credit to manage their household budgets, leading to record- or near-record high balances in credit cards and unsecured loans, according to new data from TransUnion.
The results were released as part of TransUnion’s Q1 2023 Quarterly Credit Industry Insights Report (CIIR).
While down slightly quarter-over-quarter (QoQ) at -1.5%, TransUnion reported credit card balances remain near record highs at $917 billion, which represents nearly a year-over-year (YoY) increase of almost 20%. The company noted credit card balances typically experience a seasonal drop in the first quarter as consumers use tax refunds to pay down debt levels.
Average balance per consumer remains elevated compared to the previous year, with 14.4% YoY growth, TransUnion said.
‘A Similar Story’
“It is a similar story when looking at unsecured personal loans, where balances once again reached record highs in Q1 2023,” TransUnion said in releasing its findings. “All told, balances for unsecured personal loans were up 26.3% YoY in Q1 2023 to a new high of $225 billion. It’s worth noting, however, that this represented the second consecutive quarter of decelerating YoY growth rates, which may be a sign that lenders are showing more scrutiny in making underwriting decisions.”
TransUnion said all risk tiers demonstrated YoY increases, with each tier seeing double-digit balance growth. Subprime led with a 40% increase in balances YoY, followed by super prime at 34%. Prime saw the lowest growth at just under 20%. The average balance per consumer is the highest it has been on record (since 2005) at $11,281.
‘Record Levels’
“We have seen record levels of originations in credit cards and unsecured personal loans since mid-2021 as strong credit positions have allowed consumers access to additional products. As inflation rose to near 40-year high levels, many consumers have used credit to help manage their budgets, leading to record- or near-record high balances,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. “It remains to be seen whether these balances will continue to grow in the near-term, or if growth will slow as consumers moderate their pace of borrowing and if lenders more closely scrutinize consumers and potential risk when determining to whom they lend moving forward.”
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