Consumer Payment Card News

Consumer Financial Obligations Ratio Reflects Lower Credit Card Debt

Financial Obligations Ratio (FOR) and the Consumer Service Ratio (DSR) for U.S. consumer credit continues to edge downward. According to the Federal Reserve, on a seasonally adjusted basis, the FOR slightly decreased to 15.29% in the third quarter of 2018, compared to 15.32% in the prior quarter and 15.46% in the year ago quarter. The DSR slipped down to 9.82% in the third quarter of this year, compared to 9.84% in the prior quarter, and 9.94% in the year ago quarter.

Financial Obligations and Debt Service Ratios

U.S. Consumer Debt Ratios

The FOR peaked at 18.13% in the fourth quarter of 2007. Since peaking at 13.18% in the fourth quarter of 2007, the beginning of the Great Recession, the DSR has declined steadily since, dipping into single digits for the first time in the fourth quarter of 2012 (9.87%).

The household DSR is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.
The Financial Obligations Ratio is a broader measure than the Debt Service Ratio. It includes rent payments on tenant-occupied property, auto lease payments, homeowners’ insurance, and property tax payments.

U.S. Consumer Revolving Credit

U.S. consumer credit card debt (revolving) for November, mostly credit card debt (95%), remained above the $1 trillion level for the ninth consecutive quarter. The year-on-year (YOY) change edged slightly upward in November. Consumer revolving credit increased at an annual growth rate of 5.5% in November. and an annual rate of 10.9% growth in October, compared to a revised 0.0% annual rate in September, according to informations gather by CardData

Revolving consumer credit outstandings (mostly credit card) stood at $1028.5 billion for end-of-year (EOY) 2017, compared to $969.4 billion for EOY 2016, and $907.9 billion for EOY 2015. At the end of the first quarter of 2018, revolving consumer credit stood at $1038.8 billion, reports the Federal Reserve.

However, with rising interest rates, increasing inflation, overpriced stocks uncertainty and a possible overdue recession looming, there are concerns consumer debt may by end of 2020, finds analysis by RAM Research.

Top 4 Credit Card Issuers

Credit card loans (outstandings) end-of-period (EOP) in the U.S., among the Top 4 U.S. issuers, gained a mere 1.5% in the fourth quarter (4Q/18) year-on-year (YOY), posting $444.1 billion. The YOY growth rate is down 230 basis points (bps), compared to the prior quarter, based on data collected by CardData.

U.S. Financial Obligations Ratio
(seasonally adjusted)

1Q/2017: 15.52%
2Q/2017: 15.53%
3Q/2017: 15.50%
4Q/2017: 15.46%
1Q/2018: 15.32%
2Q/2018: 15.32%
3Q/2018: 15.29%

U.S. Consumer Debt Service Ratio
(seasonally adjusted)

1Q/2017: 9.97%
2Q/2017: 9.98%
3Q/2017: 9.97%
4Q/2017: 9.94%
1Q/2018: 9.85%
2Q/2018: 9.84%
3Q/2018: 9.82%

Revolving Consumer Credit Historical

2012: $845.2 billion
2013: $855.6 billion
2014: $889.1 billion
2015: $907.9 billion
2016: $969.4 billion
2017: $1024.0 billion
2018: $1028.2 billion (as of 3Q/2018)

Source: Federal Reserve; RAM Research; CardData

NOTE: All FOR/DSR Figures Revised & Updated as of 01/08/19; All Revolving Credit Revised & Updated as of 01/08/19