Research and Statistics

Consumer credit card debt jumps in March, Fed says


Consumer credit card balances rose in March, according to the Federal Reserve, as consumers finally began to shed their reluctance to make purchases on plastic.

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Consumer credit card balances rose in March, according to the Federal Reserve, as consumers finally began to shed their reluctance to make purchases on plastic.

Consumer credit card debt grew by $2 billion in March. It’s just the second time since the summer of 2008 that consumer card balances have risen. The chart below graphs Americans’ credit card debt totals from their peak of $973.6 billion in August 2008 through March 2011.

NOTE: Click on the image to see a full-sized, interactive version of the graphic.

The Federal Reserve’s latest G.19 report on consumer credit showed that revolving debt levels — mostly made up of credit card balances — increased by about $2 billion in March to $796.1 billion. It’s just the second increase in consumer credit card debt in two-and-a-half years. That report suggests improvement in the U.S. economy may be helping consumers to feel more positive about the future. “People are only willing to buy on credit when they have the confidence they can repay it,” says Jim Chessen, chief economist with the American Bankers Association trade group.

According to data released today, the U.S. economy added a larger-than-expected 244,000 jobs in April. “Jobs are better, so now you have more spending, more demand for credit,” Chessen says.

The Fed’s G.19 report on consumer credit doesn’t only look at credit card debt. It also considers nonrevolving debt, a category that includes auto loans, student loans and loans for mobile homes, boats and trailers. When both revolving and nonrevolving were combined, overall consumer credit rose 3 percent to $2.43 trillion in March as nonrevolving debt rose 3 percent to $1.63 trillion.

See related:  Fed says credit cards easier to get, but does anyone want one?

Revolving higher

Consumers haven’t been in a hurry to borrow and, up until recently, banks were hesitant to lend. The combination pushed credit card balances lower. From September 2008 through March 2011, credit card balances fell every month except one — December 2010. On the consumer end, that multi-year drop in card balances was the result of fewer purchases on plastic and increased efforts to pay off debts. Meanwhile, on the bank side, card issuers lent less money, reduced credit limits on existing accounts and charged off debt associated with delinquent borrowers.

However, recent Fed data shows banks have changed their tune and become more eager to lend money. The Fed’s first-quarter survey of senior loan officers showed that 20.5 percent of U.S. banks reported an easing of credit card approval standards. Borrowers, meanwhile, appear to want more credit: On net, 16 percent of banks reported increased demand for a combination of larger credit lines and new credit cards. “Overall, there has been an increase in demand,” the ABA’s Chessen says.

Drivers may also be increasingly using plastic to cover the rising cost of gasoline. “Purchases of gas are more likely to be done on credit than other types of purchases. As people switch to paying for higher gas prices, it means credit balances are likely to rise,” Chessen says.

Other analysts, however, caution that a one-month increase in credit card balances doesn’t necessarily mean revolving debts levels will only head higher from now on.

“It’s a gradual transition that’s taking place,” says Scott Hoyt, director of consumer economics with Moody’s Analytics in West Chester, Pa. “I don’t think we’re going to have situation where we get an increase one month and then every month after that is positive.”

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