The average credit card debt in South Africa – how much we owe

New data from consumer credit reporting agency TransUnion shows that credit originations continue to rebound amid a tough economic climate in South Africa.

New credit activity grew, despite overall consumer sentiment indicating a cutback on spend. Credit card origination volumes — the measure for new accounts opened — increased by 37.9% YoY in Q1, in stark contrast to the 42.7% YoY decrease in originations seen at the same point in 2021, the group said.

The volume of credit card originations has steadily grown since its low in Q3 2020, indicative of increased lender appetite for growth as well as higher consumer demand for credit, TransUnion said.

“However, despite the resurgence in card originations current volumes remain below pre-pandemic levels.”

From an age perspective, 74% of all card originations came from Gen Z and Millennial consumers, indicating higher demand for credit from younger consumers and a willingness by lenders to extend credit to these borrowers.

From a risk distribution perspective, consumers with credit scores below 656 (below prime) were responsible for 66.1% of all originations for the quarter. Gen Z (born 1995-2010) and Millennials (born 1980-1994) accounted for 64% of new businesses.

This aligns with the risk view, as younger consumers are often associated with low credit scores reflective of higher risk, said TransUnion.

Average new credit lines declined by 5.2% YoY, potentially due to higher origination volumes from below-prime borrowers. Account attrition remains a concern, as the total number of active
accounts fell 2.3% YoY.

Outstanding balances are down 3.8% YoY, primarily due to the six consecutive quarters of negative new business volumes between Q1 2020 and Q2 2021.

Existing account volumes continue to decline, and new businesses in recent quarters originated at lower limits, the credit specialist said.

The serious account-level delinquency rate for credit cards ended quarter two of 2022 at 12.9%, a decrease of 80 bps from the previous quarter but remains 70 bps higher than the same
quarter in the last year, it said.

The average credit line per account is R36,800, while the average balance per account is R21,200.


Personal Loan — Bank

Bank personal loan originations improved for the fourth consecutive quarter, primarily driven by younger borrowers but remain well below pre-pandemic levels; however, opening balances for new loans are substantially higher than the prior year, said TransUnion.

The pace of origination growth recovery for personal bank loans continues for the fourth consecutive quarter. Origination volumes are up 6.8% YoY, to 908K in Q1 2022. At current levels, origination volumes remain 23.4% below pre-pandemic levels.

Average origination amounts increased substantially by 14.7% YoY, “indicating that although lenders have increased their appetite for new business, they remain cautious by giving new credit to lower-risk borrowers”.

Younger consumers drove origination growth, with Gen Z and Millennial brooders accounting for 62.5% of all new card accounts, an increase of 0.8% from the prior year.

“The need for personal loan products may continue to rise through the strenuous macroeconomic environment consumers find themselves in, as these products provide borrowers with an additional source of liquidity to assist with servicing day-to-day expenses.”


Personal Loan — Non-bank

Origination volumes continued to recover, recording growth for the fourth consecutive quarter and closing the gap to pre-pandemic levels to single digits. Opening balances on new loans were also significantly higher than in the prior year, the data showed.

Non-Bank personal loan originations are up 2.4% YoY, to 2.8 million at the end of Q1 2022. At current volumes, originations are 5% below pre-pandemic levels (Q1 2020).

At current volumes, originations are 5% below pre-pandemic levels (Q1 2020). Origination growth was driven primarily by younger and riskier consumers, with 52% of new business contributed by Gen Z and Millennial borrowers, said TransUnion.

From a risk perspective, Subprime and Near Prime borrowers accounted for 82.6% of new business, a 0.4% increase from the prior year.

Increases to new loan amounts were observed across the risk spectrum, with the most significant year-over-year increase observed for Super Prime consumers. The average new loan amount of R6,300 significantly increased from the prior year (up 21.5% YoY).

“The substantial increase in new loan amounts reflects the economic times consumers find themselves in. With record high inflation, consumers increasingly need additional liquidity to
accommodate the rising cost of living. “


Read: How much money the average South African owes on their car and house right now

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