Bankcard Balances Surpass $1 Trillion as Millennials Increasingly Turn to Cards

Rhea-AI Summary

TransUnion's Q4 2023 Credit Industry Insights Report reveals that credit card debt in the U.S. has reached a historical high, driven by Millennials increasing their credit portfolios. Bankcard balances surpassed $1 trillion for the first time, with 13% year-over-year growth. Millennials now have the largest share of bankcard balances, surpassing Baby Boomers. However, originations for unsecured personal loans and home equity lending products were down year-over-year.

Insights

Financial Analyst

The report indicating a historic high in credit card debt, especially among Millennials, suggests a shift in consumer credit behavior that could have significant implications for financial institutions and the broader economy. The year-over-year growth in bankcard balances, particularly the 32% increase in the subprime tier, points to a potential rise in credit risk. Financial institutions might face increased default rates if economic conditions deteriorate or if the burden of debt becomes unsustainable for consumers.

Moreover, the anticipation of interest rate reductions could lead to a refinancing wave, as consumers seek to manage their high-cost debt more affordably. This presents an opportunity for lenders to offer competitive refinancing options, but it also requires careful risk assessment to ensure that credit is extended responsibly. The decline in new originations for unsecured personal loans and home equity lending products may reflect a cautious approach from lenders amidst these conditions.

Economist

The report's findings are indicative of broader economic trends, such as inflationary pressures and higher living costs, which have driven consumers towards increased reliance on credit cards. This behavior has macroeconomic implications, including potentially increased consumer spending, which can stimulate economic growth in the short term. However, the accumulation of high-interest debt could lead to financial stress for households, particularly as the on-ramp to student loan payments resumes.

The decline in the Credit Industry Indicator to its lowest point since Q1 2021 suggests a cooling off in the credit market, which could signal a broader economic slowdown. If this trend continues, it could lead to a contraction in consumer spending, which is a critical driver of economic growth. The expected interest rate cuts could provide some relief by lowering borrowing costs, but it remains to be seen how this will balance against the challenges posed by high levels of consumer debt.

Market Research Analyst

The generational shift in credit card debt, with Millennials now holding a larger share of bankcard balances than Baby Boomers, reflects changing demographics and consumer preferences. Financial services companies may need to tailor their products and marketing strategies to cater to the financial habits and needs of younger generations, who are becoming the dominant consumer force in the credit market.

The decrease in originations for alternative credit products, such as personal loans and home equity lines, could be an indicator of market saturation or a shift in consumer preference back to traditional credit cards. This trend warrants further market analysis to understand the underlying consumer behaviors and to forecast future credit product demand.

Q4 2023 TransUnion Credit Industry Insights Report explores the latest U.S. credit trends

CHICAGO, Feb. 08, 2024 (GLOBE NEWSWIRE) -- Findings from the newly released Q4 2023 Quarterly Credit Industry Insights Report (CIIR) from TransUnion (NYSE: TRU) reveal that credit card debt is at a historical high, driven in part by Millennials further building on their credit portfolios. 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.

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). Balances increased across all risk tiers, led by subprime which grew 32% YoY to $105 billion. 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.

“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.”

Millennials Share of Bankcard Balances Surpassed That of Baby Boomers for the First Time in 2023

	Q4 2020	Q4 2021	Q4 2022	Q4 2023
Gen Z	2.5%	3.7%	5.2%	6.3%
Millennial	23.8%	26.0%	28.3%	29.4%
Gen X	33.9%	33.6%	33.6%	33.8%
Baby Boomers	33.6%	31.2%	28.4%	26.7%
Silent	6.2%	5.5%	4.5%	3.8%

At the same time, 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. 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.

“If the expected Fed interest rate cuts over the course of 2024 take place, 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,” said Raneri. “Consumers should know their credit scores and work to improve them where possible. This will ensure they are as well-positioned as they can be to take advantage of those lower rates if the opportunity arises.”

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. 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.

To learn more about the latest consumer credit trends, register for the Q4 2023 Quarterly Credit Industry Insights Report webinar. Read on for more specific insights about credit cards, personal loans, auto loans and mortgages.

Bankcard balances surpass $1 Trillion as average credit lines per consumer reach an all-time high

Q4 2023 CIIR Credit Card Summary

Bankcard originations were down 7% YoY in Q3 2023, representing the second consecutive quarter of annual decline. The largest percentage of originations occurred among the borrowers in the super prime risk tier followed closely by prime borrowers. Looking at borrower generations, Millennials led the way in share of originations, accounting for nearly 30%. Total bankcard balances surpassed the $1 Trillion mark for the first time in Q4 2023, representing growth of 13% YoY. Average balance per consumer was a significant part of the total balance growth and increased by 10% YoY to an all-time high of $6,360. At the same time, the number of active cardholders carrying a balance continued to steadily increase over the past 12 quarters. Total credit lines grew 8% YoY. In terms of performance, 90+ Days Past Due (DPD) consumer level delinquencies increased by 32bps YoY to 2.59% while 90+ DPD balance-level delinquencies increased by 65bps YoY to 2.17%, which marks the highest level in a decade.

Instant Analysis

“A pullback in nonprime issuance was a primary driver in the YoY decline in Q3 2023 originations and breaks the historical seasonal pattern. While delinquencies in Q4 2023 were elevated, they were in line with the expected forecasts given historic non-prime originations and balance growth. We will be carefully watching to see if typical seasonal patterns will return based on liquidity events such a tax returns and annual wage growth.”

-  Paul Siegfried, senior vice president and credit card business leader at TransUnion

Q4 2023 Credit Card Trends

Credit Card Lending Metric (Bankcard)	Q4 2023	Q4 2022	Q4 2021	Q4 2020
Number of Credit Cards	542.6 million	518.4 million	485.9 million	454.9 million
Borrower-Level Delinquency Rate (90+ DPD)	2.59%	2.26%	1.48%	1.30%
Total Credit Card Balances	$1.05 Trillion	$931 billion	$785 billion	$740 billion
Average Debt Per Borrower	$6,360	$5,805	$5,127	$5,103
Number of Consumers Carrying a Balance	169.9 million	166.0 million	159.5 million	151.8 million
Prior Quarter Originations*	20.1 million	21.6 million	20.1 million	12.3 million
Average New Account Credit Lines*	$5,673	$5,226	$4,468	$3,820

*Note: Originations are viewed one quarter in arrears to account for reporting lag.
For more credit card industry information, click here for episodes of Extra Credit: A Card and Banking Podcast by TransUnion. Click here for a Q4 2023 credit card infographic.

Unsecured personal loan balances grow while originations decline; delinquencies drop but remain elevated

Total unsecured loan balances grew for the 11^th consecutive quarter to a record of $245 billion in Q4 2023, representing a YoY increase of 10.5%. Balance growth was seen across all risk tiers, led by super prime at 35% growth YoY. Average account balance grew YoY by 6.2% to a record $8,704, led by increases in subprime (11.4%) and followed by super prime (7.6%). Originations fell by 10.3% YoY from record levels in 2022, and that was reflected in new account balances, which were down 14.6% YoY in Q3 2023 to $33 billion. All risk tiers except for super prime saw YoY declines in new account balances. Borrower-level 60+ DPD delinquency was 3.9% in Q3 2023, down from 4.1% a year prior, reflecting an originations mix shift to lower-risk borrowers due to lender tightening over the past several quarters. On a vintage basis, performance for the Q4 2022 new account vintage (through November 2023) improved vs. the Q4 2021 cohort over a similar time period but still had an elevated 60+ DPD delinquency rate at the account level compared to earlier vintages.

Instant Analysis

“With interest rates eventually lowering over the course of 2024, there could be a gradual thaw in the unsecured personal loans market. However, lenders and investors will be watching delinquency rates closely, and will hope to see continued improvements in overall and vintage performance. In the meantime, lenders will continue to compete for lower risk consumers.”

-  Liz Pagel, senior vice president of consumer lending at TransUnion

Q4 2023 Unsecured Personal Loan Trends

Personal Loan Metric	Q4 2023	Q4 2022	Q4 2021	Q4 2020
Total Balances	$245 billion	$222 billion	$167 billion	$145 billion
Number of Unsecured Personal Loans	28.1 million	27.0 million	22.8 million	21.2 million
Number of Consumers with Unsecured Personal Loans	23.5 million	22.5 million	19.9 million	19.3 million
Borrower-Level Delinquency Rate (60+ DPD)	3.90%	4.14%	3.00%	2.70%
Average Debt Per Borrower	$11,773	$11,116	$9,622	$8,795
Prior Quarter Originations*	5.0 million	5.6 million	5.1 million	3.5 million

*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Click here for additional unsecured personal loan industry metrics. Click here for a Q4 2023 unsecured personal loan infographic.

Gen Z share of originations grows as high interest rates continue to drive sluggish mortgage market

Q4 2023 CIIR Mortgage Loan Summary

Origination volumes continued to see YoY declines, down 22% to 1.2 million in Q3 2023. This, however, represented the smallest YoY decline in the past seven quarters, indicating that the mortgage origination market may be near its bottom. Purchase originations were down 18% YoY for the quarter, while rate and term refinance was down 27%. Cash-out refi was down 44% YoY in Q4 2023. Generationally, the share of mortgage originations in Q4 among Gen Z rose from 9.6% in Q3 2022 to 13.2% in Q3 2023 as more Gen Z consumers age into traditional homebuying years, while all other groups fell in share over the same period. In the home equity market, the post-pandemic surge in originations has slowed but remained above recent historic norms in Q3 2023 at 582K. This represents the second-highest Q3 since 2008. The total was split fairly evenly between HELOCs and HELOANs for the quarter, and both were driven by originations from Gen X and Baby Boomer homeowners. 60+ DPD consumer-level delinquencies continued to inch higher to 1.03% in Q4 2023.

Instant Analysis

“Persistently high mortgage rates remain a significant headwind in the mortgage market, particularly affecting demand for refinance. Purchase originations will continue to drive the mortgage market over the next several quarters, as demand for refinance will depend on mortgage rates falling significantly below current high levels. The 2022 resurgence in home equity lending continued to recede in Q3 2023, with both HELOCs and HELOANs coming off the 10-year highs seen the year prior.”

-  Satyan Merchant, senior vice president, automotive and mortgage business leader at TransUnion

Q4 2023 Mortgage Trends

Mortgage Lending Metric	Q4 2023	Q4 2022	Q4 2021	Q4 2020
Number of Mortgage Loans	52.9 million	52.6 million	51.3 million	50.8 million
Consumer-Level Delinquency Rate (60+ DPD)	1.03%	0.89%	0.75%	0.95%
Prior Quarter Originations*	1.2 million	1.5 million	3.4 million	3.9 million
Average Loan Amounts of New Mortgage Loans*	$337,977	$334,339	$311,631	$296,506
Average Balance per Consumer	$258,167	$252,212	$237,393	$222,003
Total Balances of All Mortgage Loans	$12.0 trillion	$11.7 trillion	$10.7 trillion	$9.9 trillion

* Originations are viewed one quarter in arrears to account for reporting lag.
Click here for additional mortgage industry metrics. Click here for a Q4 2023 mortgage industry infographic.

An uptick in leasing as auto inventories begin normalizing; delinquencies continue to climb

Q4 2023 CIIR Auto Loan Summary

Q3 2023 saw a 4% YoY decline in auto originations, down to 6.3 million. Among risk tiers, originations were up 13% YoY among super prime, but were down among all other risk tiers YoY, and remain down significantly when compared to pre-pandemic levels in 2019. The new vs. used share continues to slowly trend back down toward pre-pandemic levels, with used cars representing 58% of vehicles financed in Q4 2023. While still well below pre-pandemic levels, the leasing market continues its slow recovery, driven in part by more normalized inventories. 22% of newly registered vehicles were leased in Q4 2023, up from 17% one year prior. Average amount financed saw YoY declines for both new and used vehicles, with new down 3.0% YoY to $40,665 and used down 3.3% to $26,557. However, monthly payment amounts rose 1.8% for new vehicles and 1.1% for used vehicles. Point in time 60+ DPD consumer-level delinquency increased to 1.61% in Q4 2023, up from 1.43% one year prior. New vintages continue to show consistent delinquency performance when compared to the pre-pandemic periods of 2018-2019.

Instant Analysis

“New vehicle inventory continues to see recovery from pandemic-era lows, although some brands still face lingering shortages. These inventory recoveries will likely be followed by ongoing increases in consumer incentives, which should help mitigate affordability challenges in the new vehicle segment. Affordability remains an issue in the used vehicle market and for below prime consumers as we continue to see higher interest rates and the effects of inflation and used vehicle values remain elevated. While originations remain down YoY, the growth by super prime borrowers may be an early indicator of pent-up demand for vehicles, and that additional inventory and incentives may drive origination growth among additional risk tiers moving forward.”

-  Satyan Merchant, senior vice president, automotive and mortgage business leader at TransUnion

Q4 2023 Auto Loan Trends

Auto Lending Metric	Q4 2023	Q4 2022	Q4 2021	Q4 2020
Total Auto Loan Accounts	80.4 million	80.2 million	81.4 million	82.5 million
Prior Quarter Originations1	6.3 million	6.5 million	7.2 million	7.2 million
Average Monthly Payment NEW2	$737	$707	$630	$575
Average Monthly Payment USED2	$537	$529	$476	$401
Average Balance per Consumer	$23,945	$22,998	$21,298	$19,868
Average Amount Financed on New Auto Loans2	$40,665	$41,941	$40,490	$36,245
Average Amount Financed on Used Auto Loans2	$26,557	$27,456	$27,341	$22,426
Consumer-Level Delinquency Rate (60+ DPD)	1.61%	1.43%	1.05%	1.10%

¹Note: Originations are viewed one quarter in arrears to account for reporting lag.
²Data from S&P Global MobilityAutoCreditInsight, Q4 2023 data only for months of October & November.
Click here for additional auto industry metrics. Click here for a Q4 2023 auto infographic.

For more information about the report, please register for the Q4 2023 Credit Industry Insight Report webinar.

About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.

http://www.transunion.com/business

Contact	Dave Blumberg
	TransUnion
E-mail	dblumberg@transunion.com
Telephone	312-972-6646

FAQ

What does TransUnion's Q4 2023 Credit Industry Insights Report reveal about credit card debt?

The report reveals credit card debt in the U.S. has reached a historical high, driven by Millennials increasing their credit portfolios.

What is the ticker symbol for TransUnion?

The ticker symbol for TransUnion is TRU.

What is the significance of the $1 trillion mark in the report?

Bankcard balances surpassed $1 trillion for the first time, with 13% year-over-year growth.

What generation has the largest share of bankcard balances according to the report?

Millennials now have the largest share of bankcard balances, surpassing Baby Boomers.

What were the trends in originations for unsecured personal loans and home equity lending products according to the report?

Originations for unsecured personal loans and home equity lending products were down year-over-year.