Research and Statistics

Fed: Card balances ticked up in April


Balances on credit cards rose in April, marking a rebound from March, amid signs of improvement in jobs and housing.

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Credit card balances inched higher in April, marking a rebound from March, amid signs of improvement in the key area of housing.

Revolving debt, which is mainly made up of credit card balances, climbed $700 million in April, reversing  March’s revised $100 million reduction, the U.S. Federal Reserve said in its latest G.19 consumer credit report.

The amount of outstanding revolving debt was $849.8 billion, compared with a revised $849.1 billion in March, on a seasonally adjusted basis.That’s an increase of about 1 percent on an annualized basis.

Total consumer debt, which adds car loans and student loans to the revolving debt total, was $2.82 trillion, up $11.1 billion for the month, or almost 5 percent, annualized.

While consumers’ total debt load has been driven upward by student loans in recent months, “the credit card picture is more volatile — you see ups and downs month after month,” said Gregory Daco, principal U.S. economist at IHS Global Insight.

People’s budgets and expectations were both subject to a swirl of different forces in April. Consumer confidence was up, according to The Conference Board, rebounding from a decline in March. “However, consumers’ confidence has been challenged several times over the past few months by such events as the fiscal cliff, the payroll tax hike and the sequester,” Lynn Franco, director of economic indicators, said in a statement. “Thus, while expectations appear to have bounced back, it is too soon to tell if confidence is actually on the mend.”

While consumer spending picked up slightly, another federal report issued Friday showed the job picture dimming a bit. May’s unemployment rate ticked up to 7.6 percent, and the long-term unemployed made up a smaller fraction of the jobless ranks. The U.S. Labor Department characterized the change in the rate, and the number unemployed, as little changed.

April personal income was down slightly from March, the U.S. Commerce Department said, and consumer spending fell 0.2 percent. However, falling prices — led by a drop in gas prices — meant that incomes in real terms actually increased, adjusting for inflation.

Card balances are only partly the result of consumer behavior, as lenders continue to keep a close eye on granting credit. “Banks are not as loose as they were before the [financial] crisis,” Daco said. Banks in the first quarter reported easing standards somewhat for credit card applications, the Federal Reserve’s senior loan officer survey found. Consumers’ craving for cards was robust, as 18 percent of the bankers surveyed said demand was moderately stronger during the quarter.

Households got a boost from the housing market, where rising home prices are making families feel wealthier. Median home prices were up 11 percent in April as compared to April 2012, the National Association of Realtors said. Sales of existing homes rose, despite tight credit conditions and limited availability.

The big question mark hanging over the outlook is when the Federal Reserve will begin tapering its program of pumping cash into the economy by buying bonds. Concerns are rising that the Fed is leaning toward slowing down its bond buying program, a move that would generally launch interest rates upward again, affecting the rates cardholders pay on balances. But the economic environment continues to leave room for stimulus measures, Daco said.

“There’s still a lot of slack in the economy,” he said. “When you look at wage growth, it’s very much subdued.”

See related:Consumers used plastic less in March

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