Credit cards issued by credit unions underperformed this past holiday season, showing gains that clocked in at a lower level than previous years.
According to the Federal Reserve’s G-19 Consumer Credit report, credit unions saw a 1.8% increase in credit card debt from November to December, totaling $82.6% billion by December 31. This growth rate was slightly lower than the average 2.2% gain observed from 2016 through 2022 during the same period.
While credit unions’ share of the credit card market reached 6.3% in December, banks experienced a more rapid increase, with their share rising from 90.4% in December 2022 to 90.6% a year later. Conversely, finance companies saw a decline in their market share during this period.
“The winter holiday season usually brings a lift to credit card portfolios,” said Brian Riley, Director of Credit & Co-Head of Payments at Javelin Strategy & Research. “Still, this year, more consumers carried over balances from month to month, resulting in more risky debt and swelling household budgets. It is important to stay on top of the trend, whether the credit card issuer is a small credit union or community bank, or a national player.”
The Rich Get Richer
Another trend highlighted in the Consumer Credit report is the notion that the industry continues to get more top-heavy. Data from the Fed and the National Credit Union Administration showed that the 10 largest credit unions in the country are experiencing higher growth rates and maintaining larger average balances than average.
Credit card debt held by the 10 largest credit unions crept up from 44% in December 2021 to 47% by December 31, 2023. Meanwhile, the remaining ones across the nation held $43.7 billion in credit card debt by the end of 2023—a 8.2% increase from the previous year and a 4% increase since September.
Riley pointed out that credit unions are seeing further good news in the form of tempering inflation. “With the current inflation metric at 3.9%, consumers will see some relief, particularly in their energy costs, which slipped by 4.8% in the January numbers, while food items still increased by 2.6%,” he said. “Credit unions and community banks must stay on top of the risk, ensure collectors are properly trained to provide the right coverage, and negotiate with their customers to stay ahead of the delinquency curve.”
