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The 2021 Credit Card Data Book Part Two: Consumer Behaviors, Profitability, and the Larger Economy

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  • 17 Pages
  • April 2021
  • Region: United States
  • Mercator Advisory Group
  • ID: 5310614

External Factors Will Shape Dynamics in the Credit Card Industry as COVID-19 Subsides

In part one of the 2021 Credit Card Data Book report, the publisher identified the important internal dynamics in the credit card industry, noting that, while there are some warning signs, the industry avoided a catastrophe. In the follow-up report, The 2021 Credit Card Data Book Part Two: Consumer Behaviors, Profitability, and the Larger Economy, the external factors that are influencing how the credit industry will recover are examined. In particular, the report focuses on how unemployment rates, vaccination efforts, and developments in the auto, mortgage, and student loan industries will impact the near future of the credit industry.

“As last year demonstrated, external factors can have a significant impact on the credit card industry,” comments Brian Riley, Director, Credit Advisory Service, co-author of this research report. “The pandemic is still ongoing, so it remains the most important variable in determining how the economy will recover and how the credit card industry will fare in the future,” Riley continues. “How well the credit industry does in 2021 will be largely tied to how quickly the unemployment rate continues to drop. If the drop in unemployment rates stalls, economic conditions would worsen, leading to rises in charge-offs, foreclosures, and bankruptcies. However, barring setbacks on the vaccine front, we anticipate unemployment will continue to drop as normalcy is restored,” concludes Riley.

Highlights of the research report include:

  • Key industry metrics to watch in 2021
  • Where unemployment goes, the credit industry follows
  • Developments to keep track of in the auto, mortgage, and student loan industries
  • Return on Assets (ROA) is dropping
  • Interest rates stagnate
  • Consumers are less interested in credit lines, lenders are more strict in lending

Table of Contents

1. Executive Summary2. Introduction
3. External Factors
  • Unemployment Rate Begins to Recover, Concerns Remain
  • Questions Swirl around Debt Burdens and the Household Budget
  • In a Time of Uncertainty, Prime Interest Rate to Remain certain (and Constant)

4. The External Factors on Risk and Risk Management
  • ROA Plummets as Risk Mounts
  • Credit Card Interest Rates Stagnate
  • Softening Consumer Demand and Tightening Credit Policies
  • More Accounts Closed, Fewer Opened, and Credit Inquiries Fell

5. Conclusion
6. References
  • Related Research
  • Endnotes

Figure 1: Unemployment is likely to continue dropping, trending back toward pre-2020 levels
Figure 2: US household debt burden will rebound as stimulus and forbearance efforts end
Figure 3: The prime lending rate dropped back to 2014 levels and will remain there through 2023
Figure 4: Credit card ROA is falling, but it still outpaces overall bank lending
Figure 5: Credit card ROA will remain below pre-pandemic levels, but it still outpaces overall bank lending
Figure 6: Credit card interest rates dropped in 2020 and will likely remain stagnant over the next 3 years
Figure 7: Softening consumer credit demand is reinforced by tightening credit policy
Figure 8: The combination of falling demand and tightening standards drove down account openings



Companies Mentioned

  • Black Knight
  • Federal Reserve System
  • FICO