Consumer Payment Card News

Americans Credit Debt Fever Ebbs in February as Employment Expands

Credit debt fever is coming down as jobs are going up. The February data reveal U.S. consumer revolving credit is growing about half the rate of last year. The news is good for consumers, but bad for credit card issuers. However, there still are signals the economic party may be winding down in 2019.

U.S. Credit Card Debt

The year-on-year (YOY) growth rate of consumer revolving debt (97% credit card debt) for February came in at 3.3%, compared to a revised 3.0% YOY for January, and a revised 1.3% YOY for December. On a quarterly basis revolving consumer credit grew at an annual revised rate of 6.0% in the fourth quarter of 2018, compared to a revised annual rate of 8.2% in the fourth quarter of 2017.

Looking at revolving consumer credit, on annual basis, the revised growth rate for 2018 was 3.1%, compared to 5.6% for 2017; 6.8% in 2016; 5.4% for 2015; and 3.9% for 2014.

According to figures released by the Federal Reserve this afternoon, revolving consumer credit outstandings stood at $1061.0 billion for February, compared to a revised $1058.0 billion for January, and a revised $1055.4 billion for December.

U.S. Consumer Revolving Credit

(New and Revised Data as of 04/05/19)

1Q/16: $953.2 billion
1Q/17: $979.9 billion
1Q/18: $1023.5 billion
1Q/19: $1061.0 billion (February)

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

Non-revolving credit increased at an annual rate of 4.9% in February.

Total consumer credit, at the end of February, stood at $4045.8 billion, after crossing the $4 trillion milestone in November.

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.

U.S. Consumer Debt Ratios

Financial and debt obligations for consumers plateaued in all four quarters of 2018, reflecting rising employment, lower credit card debt, and steady interest rates.

The Financial Obligations Ratio (FOR) and the Consumer Service Ratio (DSR) for U.S. consumer credit remained flat in the final three months of 2018. According to the Federal Reserve, on a seasonally adjusted basis, the FOR was 15.33% in the fourth quarter of 2018, compared to a revised 15.33% in the prior quarter and a revised 15.47% in the year ago quarter. The DSR edged up slightly to 9.88% in the fourth quarter of this year, compared to a revised 9.86% in the prior quarter, and a revised 9.95% in the year ago quarter, according to CardData.

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.

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%) according to RAM Research.

Consumer Debt Outlook

Meanwhile, the Conference Board Consumer Confidence Index declined in March to 124.1, compared 131.4 in February. The Present Situation Index (consumers’ assessment of current business and labor market conditions) declined, from 172.8 to 160.6. The Expectations Index (based on consumers’ short-term outlook for income, business and labor market conditions) – decreased from 103.8 last month to 99.8 this month.

The Conference Board also found the percentage of consumers stating business conditions are “good” decreased from 40.6% to 33.4%, while those saying business conditions are “bad” increased from 11.1% to 13.6%.

The percentage of consumers expecting business conditions will improve over the next six months declined from 19.6%to 17.7%, while those expecting business conditions will worsen remained relatively flat, 9.3% versus 9.2% last month.

The Conference Board concludes the overall trend in confidence has been softening since last summer, pointing to a moderation in economic growth.

The University of Michigan Survey of Consumers reports consumer sentiment rose 4.3% in early March, compared to February, but down 3.6% from one-year ago. Consumer view of current economic conditions rose 2.5% in March, compared to the prior month, and down 8.3% from one-year ago. Consumer expectations increased 5.7% in March from February and is up 0.5% from last March.

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