This is how much money the average South African owes on their credit card

 ·3 Apr 2020

Credit reporting agency Transunion has published a new report showing that demand for consumer credit remains high, with the total number of credit card accounts increased substantially in Q4 2019.

The group noted that credit card balances continue their upward trajectory in 2019, showing an increase of 17.9% YoY. At the same time, balances reached their highest level ever despite the slow-down in originations (new applications).

“Card issuers have been aggressive in extending more credit to offset slower growth in new consumers taking on cards,” the group said.

“Lenders continue to increase limits aggressively with total credit limit growth of 15.6% which is the fourth consecutive quarter of double-digit growth.

“This increase in balances may also be stimulated by the need for consumers to use credit as a means to finance day-to-day expenses as current economic conditions remain volatile.”

Transunion found that the average South African owes R19,265 on their credit card account, while the average credit line (the amount of credit a person may borrow from) is R32,973.

Responsible lending

Despite TransUnion reporting a third consecutive quarter of increased delinquencies across all forms of credit, the group noted that credit cards had the smallest increase – up 60 bps YoY in Q4 2019.

This is likely because of a continued shift to lower-risk consumers, with 94% of all new credit cards issued to above-prime consumers, the group said.

“Further analysis shows that 57% of new credit cards were to super prime consumers, up from 47% a year ago, indicating that credit card lenders are approaching portfolio growth selectively and with caution.

“This strategy of focusing primarily on low risk borrowers has impacted new card account growth rates, with originations increasing just 1.8% YoY in the most recent quarter.

“But at the same time, the shift to lower risk borrowers has fuelled growth in new card credit limits, with average origination amounts increasing by 19.9% YoY, as card issuers are generally more comfortable in extending larger limits to consumers with good risk scores.”

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