Consumer Payment Card News

Trump Shutdown, Weak Holiday Sales, Bad Weather Dampens January Consumer Debt Growth

Revolving consumer debt, mostly credit card debt (97%), remained above the $1 trillion level for the seventh consecutive quarter. However, the year-over-year change in U.S. consumer debt growth, is powering down with the start of first quarter, extending the weakening trend experienced throughout 2018.

Consumer Debt Growth

The year-on-year (YOY) growth rate of consumer revolving debt for January came in at 2.9%, compared to a revised 6.1% YOY change for the final three months of 2018, and a revised 3.1% YOY gain for all of 2018.

The 2.9% YOY rate for January 2019, also compared to a revised 1.1% in December, and a revised 5.5% YOY change in November.

According to figures released by the Federal Reserve this afternoon, revolving consumer credit outstandings (mostly credit card) stood at $1058.0 billion for January, compared to a revised $1055.5 billion for end-of-year (EOY) 2018, compared to $1024.0 billion for EOY 2017, and a revised $969.4 billion for EOY 2016.

Non-revolving credit increased at an annual rate of 5.9% in January, according to CardData

Total consumer credit, at the end of January, stood at $4034.9 billion, after crossing the $4 trillion milestone in November.

January Factors

The impact of the government shutdown spread far and wide throwing credit accounts into arrears and slowing sales of everyday items in January. The “Trump Shutdown” also impacted holiday sales, which were already running below estimates. Holiday sales historically transfer to higher credit card balances in January. January was also an unseasonably cold and stormy month for most of the nation, with consumers sitting on their wallets while dealing with “cabin fever.”

U.S. Consumer Revolving Credit

(New and Revised Data as of 03/07/19)

1Q/16: $953.2 billion
1Q/17: $979.9 billion
1Q/18: $1023.5 billion
1Q/19: $1058.0 billion (January)

Additional Current & Historical Monthly Data on U.S. Consumer Credit

Top 4 U.S. Credit Card Outstandings

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.

The gain was largely driven by Chase, the nation’s largest issuer, as Capital One’s YOY growth rate in U.S. oustandings nosedived, and Citibank dropped below the peer average, according to analysis by RAM Research.

Chase U.S. Consumer Credit Card Debt

Chase reported EOP outstandings for 4Q/18 were up 4.9% YOY, compared to a YOY growth rate of 3.8% for 3Q/18. At the end of the fourth quarter, Chase had $150.6 billion in outstandings, compared to $146.3 billion in the prior quarter and $143.5 billion in the year ago quarter.

Capital One U.S. Consumer Credit Card Debt

Capital One reported EOP outstandings for 4Q/18 dropped sharply to 2.3% YOY, compared to a growth rate of 7.4% for 3Q/18. Capital One had $103.4 billion in 4Q/18 outstandings, compared to $100.6 billion in the prior quarter and $101.1 billion in the year ago quarter. The growth is driven by Capital One’s subprime segment, comprising 33% of its portfolio in 4Q/18, according to RAM Research.

Bank of America U.S. Consumer Credit Card Debt

Bank of America (BofA) reported EOP outstandings for 4Q/18 were up 2.1% YOY, compared to a YOY growth rate of 2.4% for 3Q/18. At the end of the fourth quarter, BofA had $98.3 billion in outstandings, compared to $94.8 billion in the prior quarter and $96.3 billion in the year ago quarter.

Citibank U.S. Consumer Credit Card Debt

Citibank reported EOP outstandings for 4Q/18 increased by 1.4% YOY, compared to a YOY growth rate of 2.4% for 3Q/18. At the end of the fourth quarter, Citibank had $91.8 billion in outstandings, compared to $88.4 billion in the prior quarter and $90.5 billion in the year ago quarter.

Financial Obligations & Debt Service Ratios

Financial Obligations Ratio (FOR) and the Debt 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.

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%).

Hazy Consumer Debt Outlook

Following three months of consecutive declines U.S. consumer confidence rebounded in February, The Conference Board Consumer Confidence Index increased in February to 131.4, up from 121.7 in January.

The strong economy with low unemployment is reducing the need for consumer credit, but bankers see a reversal in near future. Additionally, the Consumer Debt Service Ratio & Debt Financial Obligations Ratio has been declining slightly, according to analysis by RAM Research.

The Conference Board Present Situation Index – based on consumers’ assessment of current business and labor market conditions – improved, from 170.2 to 173.5. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – increased from 89.4 last month to 103.4 this month.

Consumers’ appraisal of current conditions improved moderately in February. Those stating business conditions are “good” increased from 36.4% to 41.2%, while those saying business conditions are “bad” was unchanged at 10.8%. Consumers’ assessment of the labor market was mixed. Those stating jobs are “plentiful” decreased slightly from 46.7% to 46.1%, while those claiming jobs are “hard to get” also decreased, from 12.6% to 11.8%.

Source: Federal Reserve; RAM Research; CardFlash; CardData; CardTrak; Chase; Capital One; Bank of America; Citibank; Federal Reserve; Conference Board