Consumer Payment Card News

Third-Quarter Card Debt Sinks as Stimuli Runs Dry

Third-Quarter Card Debt Sinks as Stimuli Runs Dry

Third-quarter card debt is expected to take a big hit as the waning impact of one-time consumer stimuli payments, and reductions in unemployment supplemental benefits slam consumer spending. The failure to prop up the American economy may be catastrophic for holiday spending in the final quarter of 2020.

While the second-quarter 28% decline in consumer credit card, the third quarter will likely remain in negative territory. After peaking at nearly $1.1 trillion at the end of 2019, Americans have loped-off nearly $100 billion in consumer credit card debt through July.

Third-Quarter Card Debt

U.S. revolving consumer credit stood at $994.7 billion at the end of July, compared to a revised $995.0 billion for June, and a revised $996.8 billion for May. At the end of 2019, Americans owed a revised $1094.2 billion in revolving credit, according to the latest figures released by the Federal Reserve.

U.S. revolving credit, (97% credit card debt), decreased in July at an annual rate of 0.4%, compared to one-year ago, and follows a revised -2.2% YOY (year-on-year) decline in June, and a revised -27.9% for May, according to CardData and PYRPTS.

For 2019, the data show Americans added $40 billion in revolving consumer credit, significantly above the $30 billion annual gains in the past three years, but well below the $100+ billion party in 2016. Over the past five years U.S. consumer revolving credit, on an annual basis, increased 3.7% for 2019; 3.1% for 2018; 5.6% for 2017; 6.8% for 2016: and 5.4% for 2015, according to RAM Research and CardWeb.

Credit Card Available Credit

Senior Analyst Robert McKinley says another sign American consumers are quickly running out of rope to stay afloat is the significant rise in retail (store, gas, etc) debt. As issuers of general purpose credit cards (Visa, Mastercard, American Express, Discover) raise underwriting standards (FICO 720), reduce credit lines (generally 5%) and on the verge of exploding delinquencies, cardholders will use whatever credit they have available. Digging in sock drawers and dusting off unused store credit cards is a survival strategy.
 
On a quarterly basis, U. S. consumer revolving credit decreased 30.8% YOY in the second-quarter, compared to a revised -7.6% YOY in the first-quarter, a revised 3.4% in the fourth-quarter, and 4.3% in the third-quarter of 2019. In the year ago second-quarter the YOY gain was 4.6%, according to Bankcenter and CardBuzz.

U.S. revolving consumer credit is now growing at a revised 1.77% CAGR (compound annual growth rate) since the second-quarter of 2015, compared to a 4.92% for 2019, based in analysis by CardFlash and CardTrak.

U.S. Consumer Credit Uncertainty

Non-revolving credit increased at an annual rate of 4.8% in July and a revised 5.1% for the June, according to the Federal Reserve.

Total consumer credit, at the end of July stood at $4138.9 billion, after crossing the $4 trillion milestone in November 2018.

Robert McKinley notes until third-quarter, fourth-quarter & U.S. election results are released all credit card issuers are flying blind in uncharted waters and bracing for unprecedented personal bankruptcies in 2021-22.

U.S. Consumer Revolving Credit Card Debt

1Q/15: $895.9 billion
2Q/15: $911.5 billion
3Q/15: $924.2 billion
4Q/15: $938.8 billion
1Q/16: $953.2 billion
2Q/16: $968.1 billion
3Q/16: $980.7 billion
4Q/16: $1000.1 billion
1Q/17: $980.4 billion
2Q/17: $991.5 billion
3Q/17: $1003.5 billion
4Q/17: $1022.1 billion
1Q/18: $1023.9 billion
2Q/18: $1024.2 billion
3Q/18: $1040.5 billion
4Q/18: $1054.6 billion
01/19: $1057.5 billion
02/19: $1073.4 billion
03/19: $1084.9 billion
4Q/19: $1094.2 billion
1Q/20: $1078.1 billion
2Q/20: $ 995.0 billion
3Q/20: $994.7 (July)

U.S. Consumer Revolving Credit Card Debt YOY Change
(Seasonally Adjusted)

1Q/15: 2.0%
2Q/15: 6.9%
3Q/15: 5.6%
4Q/15: 5.7%
1Q/16: 6.1%
2Q/16: 6.3%
3Q/16: 5.2%
4Q/16: 7.9%
1Q/17: 4.5%
2Q/17: 4.5%
3Q/17: 4.8%
4Q/17: 5.6%
1Q/18: 0.7%
2Q/18: 3.2%
3Q/18: 3.4%
4Q/18: 5.0%
1Q/19: 1.5%
2Q/19: 4.6%
3Q/19: 4.3%
4Q/19: 3.4%
1Q/20: -7.6%
2Q/20: -30.8%
3Q/20: -0.4% (July)

Monthly Revolving Consumer Credit

Dec 2018: $1053.5 billion
Jan 2019: $1056.3 billion
Feb 2019: $1059.5 billion
Mar 2019: $1057.5 billion
Apr 2019: $1064.1 billion
May 2019: $1071.4 billion
Jun 2019: $1075.4billion
Jul 2019: $1080.3 billion
Aug 2019: $1080.6 billion
Sep 2019: $1084.9 billion
Oct 2019: $1088.3 billion
Nov 2019: $1082.2 billion
Dec 2019: $1094.3 billion
Jan 2020: $1091.0 billion
Feb 2020: $1099.6 billion
Mar 2020: $1078.1 billion
Apr 2020: $1019.4 billion
May 2020: $996.8 billion
Jun 2020: $995.0 billion
Jul 2020: $994.7 billion

Monthly Revolving Consumer Credit YOY Change
(Seasonally Adjusted)

Dec 2018: 1.3%
Jan 2019: 3.2%
Feb 2019: 3.6%
Mar 2019: -2.3%
Apr 2019: 7.6%
May 2019: 8.3%
Jun 2019: -0.8%
Jul 2019: 10.2%
Aug 2019: -1.0%
Sep 2019: 0.2%
Oct 2019: +8.3%
Nov 2019: -5.0%
Dec 2019: 12.6%
Jan 2020: -3.7%
Feb 2020: 7.1%
Mar 2020: -28.6%
Apr 2020: -65.3%
May 2020: -27.9%
Jun 2020: -2.2%
Jul 2020: -0.4%

Sources: Federal Reserve; CardData; RAM Research; CardTrak; CardFlash; Cardworthy; CardWeb; PYRPTS; CardBuzz; Bankcenter; PYVNTS; Ruebud Media; Red3 Media; Robear’s List