Consumer Payment Card News

Credit Card Debt Slides After Aberrant Summer Bump

Credit Card Debt

U.S. credit card debt continued to decline in September for the second consecutive month following a July surge and an April/May spending binge. In August as Americans knocked-off $1 billion in new revolving consumer debt, mostly credit card debt, after adding $15 billion in new credit card debt this year, mostly between April and July. The decline dovetails with the recent sharp declines in U.S. consumer confidence.

U.S. revolving credit, (97% credit card debt), decreased in September, at an annual rate of 1.2%, compared to one-year ago, and follows a revised 2.5% YOY (year-on-year) decline in August, according to CardData.

U.S. revolving consumer credit stood at $1077.0 billion at the end of September, compared to a revised $1078.1 billion for August, and a revised $1080.1 billion for July, At the end of 2018, Americans owed a revised $1053.5 billion in revolving credit, according to the latest figures released by the Federal Reserve.

Credit Card Debt Analysis

On a quarterly basis, U. S. consumer revolving credit increased by a revised 2.2% YOY in the third-quarter, compared to a revised 5.2% YOY in the second-quarter, and a revised 3.4% in the third-quarter of last year.
U.S. revolving consumer credit is now growing at 3.93% CAGR (compound annual growth rate) since the third-quarter of 2015, based in analysis by RAM Research.

The spring credit bubble was largely attributed to pent-up consumer demand in the government shutdown and bad weather of the first-quarter. However, the brief July surge was likely driven by upcoming trade taxes and a pick up in general consumer confidence. But, it quickly disappeared in August and September with trade war uncertainty and as more negative economic markers emerged, notes Robert McKinley, Senior Analyst for CardTrak, CardData and CardFlash.

McKinley also notes the Federal Reserve data tracks the third-quarter figures reported by the Top 4 U.S. credit card issuers who hold $452 billion in credit card debt, or a little less than 50% of the market total of $1 trillion.

Notwithstanding, holiday spending is expected to rise 4% this season.

Non-revolving credit increased at an annual rate of 4.2% in September and 4.4% for the third-quarter.

Total consumer credit, at the end of September stood at $4149.3 billion, after crossing the $4 trillion milestone in November.

Top 4 U.S. Credit Card Issuers Debt

Third-quarter credit card loan growth, among the Top 4 U.S. issuers, grew a paltry 4.4% year-on-year (YOY), compared to 3.4% YOY in the prior quarter, and compared to 4.8% YOY one-year ago. Among the nation’s Top 4 credit card issuers (Chase [JPM], Capital One [COF], Bank of America [BAC], and Citibank [C]), the annual growth rate for U.S. end-of-period (EOP) credit card outstandings in the third-quarter (3Q/19) is the lowest in the more than five years, according to CardData.

National Consumer Confidence

For the third month in a row The Conference Board Consumer Confidence Index decreased. The October Index now stands at 125.9, down from 126.3 in September. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – increased from 170.6 to 172.3. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – declined from 96.8 last month to 94.9 for October.

On a final note, despite three rate cuts this year, interest rates on credit cards remain at the highest levels in 19 years, reports CardTrak.



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Source: Federal Reserve; RAM Research; CardFlash; CardData; CardTrak; Conference Board; Chase; Citibank; Bank of America; Capital One; Bankcenter; CardBuzz; PYRPTS; PYVNTS; Ruebud Media; Red3 Media