Fed: Card balances jumped by $4.8 billion in November
Personal finance journalist with an eye for industry news
Credit card balances rose in November, according to a federal government report released Tuesday.
Consumer revolving debt – which is mostly credit card balances – increased by $4.8 billion on a seasonally adjusted basis to $1.042 trillion, per the Federal Reserve’s G.19 consumer credit report. The annualized growth rate was 5.5 percent.
November’s increase comes one month after revolving debt surged to an all-time record. But card balance growth was relatively slow through most of 2018, with the Fed reporting annualized decreases in revolving debt five times throughout the year, after revisions. (By contrast, revolving debt grew every month in 2017, according to the Fed’s historical data.)
Total consumer debt, which includes student and car loans as well as revolving debt, increased by $22.2 billion to $3.98 trillion – an annualized growth rate of 6.7 percent.
The average interest rate on credit card accounts was 14.73 percent in November, up from a 14.38 percent average in August, the last time interest rates were reported in the consumer debt figures. The average rate on accounts that were charged interest because they carried a balance was 16.86 percent, up from 16.46 percent in August.
See related: Card balances surged in October
Card delinquencies ticked up in Q3
As revolving debt continues to reach new heights, some consumers are falling behind on their credit card payments. The American Bankers Association said in a Jan. 8 report the delinquency rate for bank cards rose from 2.93 percent to 3.05 percent in the third quarter of 2018. The composite rate for installment loans and cards grew from 1.79 percent to 1.87 percent.
The uptick in late card payments followed a slight decrease reported in Q2. ABA chief economist James Chessen noted in a news release that higher loan and card delinquencies are “not surprising” as economic growth moderated in Q3. U.S. GDP grew by 3.4 percent in the third quarter, compared to 4.2 percent in the second quarter, per federal data.
“Bank card delinquencies remain low by historical standards, which is a direct result of consumers continuing to do a good job of managing their cards by keeping balances low relative to their income,” Chessen said.
No more rate hikes ‘til June?
Keeping balances low has become even more critical to cardholders as the Fed marches on with rate hikes. The rate-setting Federal Open Market Committee voted at its December meeting to raise the federal funds rate by a quarter of a percentage point.
Many card issuers raised APRs in tandem with the rate hike in the ensuing weeks. The average APR on new card accounts is now well above 17 percent, according to the CreditCards.com Weekly Credit Card Rate Report.
The Fed raised rates four times in 2018, but it now projects only two increases in 2019 amid an expected slowdown in economic growth.
See related: Guide to rising credit card interest rates
Meanwhile, 2018 was a strong year for hiring, and it went out with a bang. The U.S. economy added 312,000 jobs in December – the biggest increase in 10 months – and wages grew by 0.4 percent.
Ian Shepherdson, senior economist at Pantheon Macroeconomics, said more blockbuster job reports like December’s would make it impossible for the Fed to hold off on its plans for more rate hikes. However, the Fed could wait until the summer depending on the outcome of U.S. trade negotiations with China and a potential slowdown in job gains.
“We’d be very surprised by a hike in March, but if a trade deal is done in the spring and payroll growth softens rather than roll over, as we expect, they will hike in June,” Shepherdson wrote.
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