Findings from the newly released Q2 2024 Quarterly Credit Industry Insights Report (CIIR) from TransUnion reveal that as consumers continue to await interest rate relief in the form of rate cuts, credit products continue to serve to bridge the financial gaps that may exist in many household budgets.

The report reveals that in this challenging current macroeconomic environment, consumers are continuing to engage in the credit market, taking on more balances and credit products. And while prime and below consumers are seeing lower year-over-year (YoY) new originations across many products, though not all, they continue to use their available credit to get by each month as evidenced by YoY growth in credit card balances and utilization.

“Consumers across the board continue to engage with a wide range of credit products, with continued balance growth across credit risk tiers. Lower risk super prime, in particular, originated more this quarter in areas such as credit cards and auto,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “Of course, on the origination front, this doesn’t mean prime and below consumers don’t also have access to new credit in these areas. However, they are going to have to wait for lower interest rates and for their monthly payments to come down.”

Key findings include:

• Unsecured personal loan balance growth continued in Q2 2024, albeit at a more moderated pace. While it was the seventh consecutive quarter of balance growth, YoY growth was only 6%, down from the double-digit growth seen at its peak. Originations saw YoY growth for the first time in five quarters in Q1 2024 (the most recent quarter for which originations data are available). Growth was led by super prime and near prime, at 12% and 10% YoY growth respectively, and all risk tiers except prime plus seeing growth.
• Bank card balances grew 4.8% YoY led by subprime at 12.3% growth. All risk tiers saw growth YoY. Card originations were down 7% YoY in Q1 2024. However, super prime saw growth YoY.
• It’s a similar story with auto, with originations down YoY in Q1 2024, with the exception of super prime. Among the super prime risk tier, originations were up 10.3% YoY in Q1 2024. Balances grew 2.7% YoY, primarily behind growth among the subprime (9.8%) and super prime (7.9%) risk tiers.
• Mortgage originations saw YoY growth in Q1 2024, which represents the first YoY growth since 2021. The growth was headlined by growth on both ends of the credit risk spectrum, with subprime up 15.7% YoY and super prime up 12.1% over that time.

Raneri added, “It remains to be seen how these numbers will change if and when the Fed lowers interest rates later this year. For consumers, the best thing that they can do is ensure that their credit is in the best position possible when that time comes in hopes of being able to take advantage of those lower rates.”

To learn more about the latest consumer credit trends, register for the Q2 2024 Quarterly Credit Industry Insights Report webinar. Read on for more specific insights about credit cards, personal loans, auto loans and mortgages.

Balances and Accounts Rise YoY as Consumers Continue to Turn to Cards

Q2 2024 CIIR Credit Card Summary

The total number of credit cards topped 545 million in Q2 2024 as consumers continued to turn to cards to help manage in this challenging economic environment. Similarly, balances continued to grow (up 8.6% YoY) albeit at a lower rate than previously. This follows a period of consistent double-digit YoY percentage increases. Total balances remained above one trillion for the third consecutive quarter, at $1.05 trillion. Borrower-level delinquencies measured as 90 or more days past due (90+ DPD) increased by 20bps YoY to 2.26%; however, the YoY increase between 2023 and 2024 was significantly less than the 49bps YoY increase between 2022 and 2023. Bankcard originations declined 7% YoY, marking the fourth consecutive quarter of YoY declines. Generationally, 19% of all originations were attributed to Gen Z, up 2% YoY, and the only generation that saw a YoY increase in share.

Instant Analysis

“A more pronounced divergence appears to be occurring when it comes to how different consumer segments are faring in this economic environment, and in particular, how they are using their credit cards. Higher-risk prime and below segments seem to be experiencing more significant inflationary pressures and as such, relying on their cards more, evident in increasing balances and higher utilization. Originations will likely continue to decline for mid-tier and worse consumers as issuers look to less risky borrowers. We expect delinquency rates to continue to rise, though the growth rate should decelerate.”

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

Q2 2024 CIIR Unsecured Personal Loan Summary

After five consecutive quarters of YoY originations declines, unsecured personal loan originations were up 7% YoY in Q1 2024 to 4.6 million. Almost all risk tiers, except for prime plus, contributed to the growth in originations, led by super prime and near prime. Q2 2024 represented the 12th consecutive quarter of YoY growth in total balances. However, for the 7th consecutive quarter, that YoY balance growth was at a slower rate than the quarter before, with growth of 6% to $246 billion. Total new account balance for Q1 2024 fell 10% YoY to $27 billion, while the average balance per consumer saw a small growth of 1.2% YoY in Q2 2024. Total number of consumers with a balance grew YoY for the 11th consecutive quarter, reaching 23.9 million. Consumer-level 60+ DPD delinquencies fell to 3.4% in Q2 2024. This was led by subprime, which saw a decline of nearly 7% YoY in Q2 2024.

Instant Analysis

“Super prime lending largely fueled the new record in balances and contributed to the first YoY quarter of origination growth in five quarters, although total new account balances were lower in aggregate. Delinquency numbers continued to improve for the second consecutive quarter, driven by lower subprime borrower delinquencies. We are seeing FinTech activity in the unsecured personal loans market returning to levels seen in previous years. It will be worth watching to see if FinTechs, and other lenders, are positioning themselves to take advantage of likely Federal Reserve rate cuts later in 2024.”

Liz Pagel, senior vice president of consumer lending at TransUnion