Samantha: Hello, this is Samantha Shares.
Todayâs episode covers key findings from the Consumer Financial Protection
Bureauâs most recent Consumer Credit Card Market Report, released
in December twenty twenty-five.
This is not a regulation and not a proposed rule.
It is a market-wide report required by Congress that looks at how
consumers are using credit cards, how issuers are managing risk, and
where growth and stress are showing up across the credit card system.
This podcast is educational and is not legal advice.
We are sponsored by Credit Union Exam Solutions Incorporated, whose
team has over two hundred and forty years of National Credit
Union Administration experience.
We assist our clients with N C U A so they save time and money.
If you are worried about a recent, upcoming, or in-process N C U A
examination, reach out to learn how they can assist at Mark Treichel dot com.
Also check out our other podcast called With Flying Colors, where we provide tips
on how to achieve success with N C U A.
Letâs start with the big picture.
Credit cards remain one of the most widely used financial products in the country.
According to the report, about two hundred and eight million Americans
now have at least one credit card.
That represents roughly three quarters of all adults in the United States.
That tells us something important right away.
Credit cards are not a niche product.
They are deeply embedded in everyday financial life.
People use them to buy groceries, pay for gas, manage subscriptions,
cover medical bills, book travel, and smooth out short-term cash flow gaps.
Total credit card purchase volume reached approximately three point six
trillion dollars in twenty twenty-four.
Outstanding balances exceeded one point two trillion dollars.
The average cardholder now carries a balance of just over five
thousand three hundred dollars.
For borrowers with stronger credit profiles, average balances
are significantly higher.
Those numbers reflect not just spending, but reliance.
They show how much households are leaning on credit cards
as a flexible financial tool.
But the most important story in this report is not the size of the market.
It is who is driving growth, and who is not.
The report shows that nearly all recent growth in credit card
spending is coming from borrowers with very strong credit scores.
Superprime and prime-plus borrowers are responsible for most of the
increase in purchase volume and balances over the past two years.
By contrast, spending growth for borrowers with prime or lower credit
scores has been essentially flat since late twenty twenty-three, even
though the number of cardholders in those tiers has continued to increase.
That is a critical point.
It means more people have credit cards, but many of them are not
using those cards more aggressively.
They appear constrained.
Higher-credit-score households, on the other hand, continue to spend,
travel, and absorb higher prices.
This uneven growth pattern matters, especially for institutions that
serve a broad membership base.
Now letâs talk about pricing.
Across the broader credit card market, interest rates reached
historic highs in twenty twenty-four.
Average annual percentage rates exceeded twenty-five percent for
general purpose credit cards and topped thirty percent for private label cards.
New credit card accounts opened last year carried interest rates far higher
than what was typical just ten years ago.
These increases reflect the interest-rate environment, but they
also reflect risk-based pricing at work.
Banks and nonbank issuers have been able to adjust credit card pricing as
rates rose and as borrower risk shifted.
Credit unions operate under a different structure.
Federal credit unions are capped at eighteen percent on all loan
rates, including credit cards.
That cap fundamentally changes how credit unions manage credit card risk.
Credit unions cannot simply raise rates to compensate for higher
credit risk or higher funding costs.
Instead, they manage credit card risk through underwriting
standards, credit limits, portfolio mix, and ongoing monitoring.
That difference becomes especially important when we look at who holds
risk in the credit card system.
According to the report, issuers with less than one hundred billion dollars
in assets hold more than half of all below-prime credit card balances.
Large issuers, by contrast, hold nearly all superprime balances.
Credit unions overwhelmingly fall into the smaller-issuer category.
As a result, credit unions often serve more higher-risk credit
card borrowers than large banks.
And because they are capped at eighteen percent on loan rates, they
manage that risk primarily through underwriting, credit limits, and ongoing
monitoring rather than higher pricing.
That is not a flaw in the credit union model.
It is a structural reality.
It also means credit card portfolios at credit unions will behave differently
than those at large banks, especially during periods of economic stress.
Now letâs take a step back and put this into historical context.
Before the pandemic, credit card usage followed fairly predictable patterns.
Revolving rates were stable.
Delinquencies moved gradually with economic conditions.
Consumers generally used credit cards for discretionary spending and convenience.
During the pandemic, those patterns broke down.
Consumers paid down balances aggressively.
Revolving rates fell.
Stimulus payments and reduced spending opportunities changed behavior
in ways that were highly unusual.
What we are seeing now is not a return to the old normal.
It is a new normal.
Balances are higher.
Minimum-payment behavior is more common.
Spending growth is uneven.
And credit cards are increasingly used for essential expenses rather
than discretionary purchases.
That context matters when interpreting todayâs numbers.
Now letâs talk more directly about consumer stress signals.
One of the clearest indicators in the report is minimum-payment behavior.
About fifteen percent of general purpose cardholders made only the
minimum payment in twenty twenty-four.
For private label cards, that figure was closer to twenty percent.
At the same time, about half of all credit card accounts are now
revolving balances, meaning balances are not paid in full each month.
That level is roughly back to where it was before the pandemic.
The report also notes that delinquencies and charge-offs rose sharply in
early twenty twenty-four, reaching levels not seen in many years,
before declining later in the year.
By year end, delinquency rates moved closer to pre-pandemic norms.
That normalization sounds reassuring, but it needs context.
Minimum-payment behavior remains elevated.
Average balances remain high.
That suggests many households are still under financial pressure, even
if they are not yet missing payments.
In other words, stability does not necessarily mean comfort.
Now letâs talk about how consumers are actually using their cards.
The report shows that credit cards are increasingly used for everyday essentials.
Food, gas, utilities, and healthcare spending make up a
growing share of transactions.
Higher-credit-score borrowers tend to use cards more heavily for
travel and discretionary spending.
Lower-credit-score borrowers are more likely to use cards for necessities.
That distinction matters because spending on essentials is harder to cut back.
When cards are used for groceries and utilities, balances are less
likely to come down quickly.
Now letâs turn to operational risk.
Consumers disputed nearly ten billion dollars in credit card
charges, resulting in almost six billion dollars in chargebacks.
The most common source of disputes was not fraud.
It was canceled recurring transactions, such as subscriptions,
memberships, and utilities.
That tells us something important.
These disputes are not primarily about bad actors.
They are about servicing clarity, cancellation processes, billing
transparency, and customer communication.
That means credit card risk is not just about credit losses.
It is also about operational discipline and member experience.
The report also spends time on innovation.
Artificial intelligence and alternative data are expanding access to credit,
particularly for consumers with thin or limited credit histories.
These tools are changing how issuers evaluate applications and manage accounts.
At the same time, artificial intelligence is accelerating payments fraud.
Fraud attempts are faster, more sophisticated, and harder to detect.
Institutions are balancing innovation with control in real time.
The report also highlights emerging alternatives to traditional card
payments, including pay-by-bank systems and stablecoins.
These are not immediate threats, but they represent longer-term changes
that could affect card usage over time.
So what does all of this mean for credit unions?
The takeaway is not that credit unions are underpricing risk.
Credit unions operate within a legally defined pricing framework.
The takeaway is that credit unions are managing credit card portfolios
in a high-rate environment, with uneven consumer stress, while
serving a membership base that often includes higher-risk borrowers.
That reality places added importance on underwriting discipline,
credit line management, portfolio monitoring, servicing controls,
and clear internal documentation.
It also places added importance on being able to clearly explain credit card
strategy to boards and leadership teams.
This report provides useful context for those conversations.
It helps explain why credit card performance may look different
across institutions, and why managing risk through structure
rather than price is a defining feature of the credit union model.
This concludes the episode.
If your credit union could use assistance with your exam, reach out to Mark Treichel
on LinkedIn or at Mark Treichel dot com.
This is Samantha Shares, and we thank you for listening.