BACK

Research and Statistics

Credit card balances fall in March

Summary

Consumers used plastic less in March amid gloomy reports from the job front and a deceleration in spending.

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Credit card balances ended two months of modest upward movement in March, falling despite an improving job climate and expanding paychecks.

Revolving debt, which is mainly made up of credit card balances, fell $1.7 billion in March, following February’s revised $400,000 increase, the U.S. Federal Reserve said in its latest G.19 consumer credit report.

The amount of outstanding revolving debt was $846.2 billion, compared with a revised $847.9 billion  in February.

Overall consumer debt, including cards plus auto loans and student loans, rose $8 billion to reach more than $2.8 trillion in March, compared to $2.79 trillion in February.

The drop in revolving credit ran counter to the rise in total consumer debt, which has seen car loans and student loans outpace the riskier, unsecured category of credit card debt.

Consumer spending slows

The pullback from credit card debt came as consumers slowed the pace of spending increases. Consumer spending rose $21 billion in March, down from February’s $81.6 billion increase. Personal income was up $30.9 billion, or a scant 0.2 percent for the month.

“I think we probably reached a bit of a high-water mark, at least in the growth rate of consumer spending in the near term,” said James Marple, senior economist at TD Economics. Among other factors, the sharp federal budget cuts known as the sequester will have a deepening impact on pay of federal workers and federal contractors as the year goes on.

Consumer confidence fell in March, as the negative news around the sequester helped sour the outlook. The wholesale cuts in federal spending created uncertainty about the future, The Conference Board said. Perhaps not surprisingly, confidence rebounded strongly in April, following sunnier employment numbers.

The Labor Department’s unemployment report for March initially said only an anemic 88,000 jobs were created, underperforming analysts’ expectations and raising concerns about a “spring slump” in the economy.

“It had looked as though March was a really lousy month,” Marple said.

But it turned out the job market was actually better than reported. Revised figures said the economy created 138,000 jobs in March. That, plus an upward revision for February and gains in April, helped pull down the current unemployment rate down to 7.5 percent, beating most expectations.

“I’m in the camp that thinks the economy is stronger than it was portrayed,” said Michael Walden, professor of economics at North Carolina State University. “I think this is going to be the year of the return of the consumer.”

Demand for credit grows

With the job market improving, households will ease back into major purchases that have been put on hold for years, he said. As time goes on, the replacement of a tired refrigerator or air conditioner graduates from a “want” to a “need” and inserts itself into the household budget.

“I think we’ll see consumers begin to replace durable goods, all of which are heavily aged,” he said. “All of this translates into more borrowing.”

Indeed, consumer demand for plastic is outpacing lenders’ willingness to give it. According to the Federal Reserve’s survey of senior loan officers, 18 percent of banks saw stronger demand for credit cards during the first quarter, while only about 7 percent said they had eased their standards for granting new cards. The survey results suggest that the weak rise in credit card balances has more to do with tight lending practices at banks than wariness by shell-shocked consumers.

Rates on new credit card offers are hovering at just under 15 percent, according to the CreditCards.com weekly rate report. The review of 100 cards found an average APR of 14.93 percent, compared to 15.01 percent six months ago.

What’s up next?

In Research and Statistics

Infographic: The money topics your kids wish you’d talk about

Most parents say they talk about money regularly with their kids. Their children, however, don’t think these conversations are enough.

Published: May 7, 2013

See more stories
Credit Card Rate Report Updated: April 20th, 2019
Business
15.32%
Airline
17.50%
Reward
17.56%
Cash Back
17.60%
Student
17.79%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.