Americans tapping holiday credit early this year as holiday spending drove U.S. credit card debt up by nearly $8 billion in October, now growing by approximately 9% over the prior year. The October surprise is consistent with the erratic pattern of consumer spending and borrowing in 2019. Over the past ten months the monthly YOY (year-on-year) change has range from a revised minus 2.3% (March) to a revised positive 10.2% (July).
U.S. revolving credit, (97% credit card debt), increased in October at an annual rate of 8.8%, compared to one-year ago, and follows a revised +0.2% YOY (year-on-year) gain in September, according to CardData.
U.S. revolving consumer credit stood at $1088.7 billion at the end of October, compared to a revised $1080.8 billion for September, and a revised $1080.6 billion for August. 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.
Tapping Holiday Credit Debt Analysis
On a quarterly basis, U. S. consumer revolving credit increased a revised 3.6% 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 a revised 3.98% CAGR (compound annual growth rate) since the third-quarter of 2015, based in analysis by RAM Research and PYRPTS.
The spring credit bubble was largely attributed to pent-up consumer demand in the government shutdown and bad weather in 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 eroding consumer confidence. “It is likely the October bump was spurred by delayed tariffs, an interest rate cut and aggressive retail price reductions,” says Robert McKinley, Senior Analyst for CardTrak, CardData and CardFlash.
Holiday spending is expected to rise 4% this season.
Non-revolving credit increased at an annual rate of 4.3% in October and a revised 5.6% for the third-quarter.
Total consumer credit, at the end of October stood at $4165.3 billion, after crossing the $4 trillion milestone in November 2018.
Top 4 U.S. Credit Card Issuers Debt
Third-quarter card loan growth, among the Top 4 U.S. issuers, grew a solid 4.3% year-on-year (YOY), compared to 2.6% YOY in the prior quarter, and compared to 2.8% 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 second lowest in the past five years.
For the third-quarter U.S. credit card EOP outstandings, among the Top 4 posted at $450.8 billion, compared to $440.2 billion for 2Q/19, and $432.1 billion for 3Q/18. For the third-quarter of 2015, the Top 4 reported $362.4 billion in U.S. EOP credit card outstandings, according to figures collected by CardData.
The YOY gain in U.S. EOP outstandings for the third-quarter of 4.3%, compares to a YOY increase of 2.8% in 3Q/18, 6.5% in 3Q/17, and 8.9% in 3Q/16. U.S. EOP outstandings for the Top 4 U.S. issuers is now growing at a 5.61% compound annual growth rate (CAGR), compared to 5.31% in the prior quarter, according to RAM Research.
November National Consumer Confidence
For the fourth month in a row The Conference Board Consumer Confidence Index decreased. The November Index now stands at 125.5, down from 126.1 in October. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased from 173.5 to 166.9. However, the Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – increased from 94.5 last month to 97.9 for November.
Credit Card Rates
Despite three rate cuts this year, interest rates on credit cards remain at the highest levels in 19 years and may head higher if proposed legislation relaxes rate caps on some loans.
Card APRs for U.S.-issued major credit cards in the third-quarter increased by 64 basis points (bps) between the third-quarter 2018 (3Q/18) and 3Q/19, as the U.S. prime rate decreased by 50 bps. The average credit card rate charged by the nation’s Top 100 banks hit 15.10% in 3Q/19, down 3 bps from the prior quarter, and compared to 14.38% for 3Q/18. Since December 29, 2018 the prime rate has declined from 5.50% to 5.00%, according to figures gathered by CardTrak.
Third-quarter rates for U.S. bank issued credit cards of 15.13% sets a new 19 year high of compared to 2000 when rates hit 15.71% Additionally, the spread between average credit card rates in 3Q/19 is 985 bps, compared to previous high of 978 in 2010, based on analysis by RAM Research.