This Is Why You Should Be Pushing Your Store Card Right Now

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This Is Why You Should Be Pushing Your Store Card Right Now

While it is common knowledge that more consumers open private label credit cards during the holiday season, TransUnion research has found that the number of new accounts often doubles for certain retailers in the month of December. The new analysis determined that online stores (2.0x greater than non-holidays), discount retailers (2.0x) and jewelry stores (1.8x) experience the biggest seasonal increases in card originations.

Retail card growth is greatest during the year-end holidays, and the number of consumers with such cards has consistently risen in recent years. The number of consumers with retail card credit jumped from 123.7 million in December 2014 to 124.8 million in December 2015. As of Q3 2016, the number of consumers with retail cards grew to 125.3 million and will likely grow substantially during this year's holiday season. Department store cards make up the largest portion of a consumer's retail card wallet, with about one-third of retail card accounts in that merchant category.

TransUnion also projects retail card balances will continue to increase at the end of 2016 and into 2017, and while the delinquency rate will remain low, it will experience an uptick from the year-end 2015 rate.

"A strong economy has propelled consumer spending, and we expect this trend to continue during the 2016 holiday shopping season," said Nidhi Verma, senior director of research and consulting for TransUnion. "Consumers gain more access to retail cards during the holidays, and they benefit from strong value propositions-discounts and deals-that motivate them to use their cards. The primary beneficiaries from a retail standpoint include online retailers, jewelry stores and big box discounters, who often create enticing offers for prospective shoppers. As consumers spend more time online, it is natural for online retail cards to experience increasingly larger volumes of account openings during the holiday shopping season."

Retail Card Lift in Originations during the 2015 Holiday Season (December)

  Retail Card Category   Lift compared to non-holiday season
  Discount Stores   2.03x
  Online   1.97x
  Jewelry   1.77x
  Department Stores   1.56x
  Clothing   1.35x
  Electronic   1.35x
  Furniture   1.20x
  Home Improvement   1.03x
The consumer makeup of the observed lift in new retail card accounts was spread across the entire credit risk spectrum. The largest lifts were seen in the subprime (VantageScore® 3.0 below 600) and near prime (VantageScore® 3.0 between 601 and 660) risk groups.

New Account Growth in Holidays Compared to Non-Holiday Average Growth

  Risk Tier Seasonal lift in 2013 Seasonal lift in 2014 Seasonal lift in 2015
  Subprime 184% 189% 185%
  Near prime 141% 166% 165%
  Prime 125% 163% 156%
  Prime plus 113% 164% 149%
  Super prime 100% 155% 143%
  Total 121% 164% 156%

With the recent increase in subprime and near prime card openings, TransUnion projects retail card delinquency will rise modestly from year-end 2015 (1.30%) to close both 2016 (1.40%) and 2017 (1.44%) higher. The average retail card balance (for consumers who carry a balance) is also projected to rise to $1,800 by the end of 2017 from $1,725 in Q4 2015.

Retail Card Delinquency and Balance

      Q4 2013   Q4 2014   Q4 2015   Q4 2016 (Projection)   Q4 2017 (Projection)
  Retail Card Delinquency Rate (90+ DPD)   1.21%   1.21%   1.30%   1.40%   1.44%
  Retail Card Avg. Balance per Borrower   $1,661   $1,648   $1,725   $1,768   $1,801
"Typically, retail card delinquency rates are highest during the fourth quarter every year, as some consumers may face challenges after shopping or opening new cards," said Verma. "In some cases, a consumer may forget he opened a new card and miss his first payment as a result. Consumers should be mindful of their new payment responsibilities and ensure they do not overextend themselves during the holiday shopping season."

For more information on managing your credit obligations during the holidays, please visit TransUnion's blog. Lenders interested in learning more about consumer payment patterns and how they can incorporate these insights into lending strategies are encouraged to visit TransUnion's ScoreSavvy website.