Research and Statistics

Fed’s G19 report: Credit card activity slows in April 2008


The Fed’s latest G19 data shows revolving credit (of which about 98 percent is comprised of credit card debt) edged upward at an annual rate of about half a percentage point percent in April 2008.

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Credit card activity slowed significantly in April, according to the most recent Federal Reserve release on consumer credit.

The Fed’s latest G19 report shows revolving credit (of which about 98 percent is comprised of credit card debt) edged upward at an annual rate of about half a percentage point in April. That was a sizable dropoff from March, when revolving credit leapt 7.4 percent higher. With the latest increase, revolving credit firmed to $956.9 billion from $956.6 billion the month before.

Overall consumer credit (revolving and nonrevolving) rose 4.2 percent in April to $2.56 trillion.

The latest data showed consumers used less credit than initially estimated in March, with both overall and revolving credit revised downward.

April’s data doesn’t mean consumers are simply limiting their spending for the sake of frugality. Rather, the slowdown in revolving credit is “consistent with what you see in terms of a general tightening in credit availability,” says Dennis Moroney, senior bank card analyst with TowerGroup. According to Moroney, banks appear to be reducing consumers’ lines of credit at the same time as consumers are tapping out their credit lines. “They may have reached their limits on cards,” Moroney says. That combination means cardholders have less room to maneuver.

There also may be fewer card offers going out, says Jeff Langer, a partner in the banking department at law firm Chapman and Cutler LLP in Chicago, who highlights “a decline in new unsolicited credit card mailings in the first quarter  of 2008 compared with the first quarter of 2007, which likely  resulted in fewer new accounts being opened.”

Meanwhile, there could be a redirection of dollars “as consumers cut back on purchases of bigger-ticket items because of rising gas and food prices,” Langer says.

As credit card use holds steady, but consumers struggle to make payments on their outstanding balances, Moroney foresees delinquent credit card dollars outpacing balances. The result? “Delinquencies are going to pop-up,” he says. That could mean “record highs on delinquencies come June if the trends persist,” Moroney says.

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