Card balances continued to climb to new heights in February, according to the Federal Reserve.
Consumer revolving debt, which is primarily credit card balances, inched up by $100 million on a seasonally adjusted basis to $1.031 trillion, per the Federal Reserve’s G.19 consumer credit report. The annualized growth rate was 0.2 percent.
February 2018 was the 26th consecutive month in which card balances increased, according to the Fed’s historical data. Revolving debt last fell in December 2015, when it dropped to $908 billion. Card balances rose again to $911 billion the following month and have been on an uninterrupted climb since then. Consumers set a new all-time record for revolving debt in November 2017, when it reached $1.022 trillion.
Total consumer debt, which encompasses student and car loans in addition to card balances, increased by $10.6 billion to $3.87 trillion – an annualized growth rate of 3.3 percent.
The average interest rate on credit card accounts was 13.63 percent in February, according to the Fed report, up from a 13.16 percent average in November, the last time interest rates were examined in the consumer debt figures. The average rate on accounts that were charged interest because they carried a balance was 15.32 percent, up from 14.99 percent in November.
February’s rise in card balances follows a $1.5 billion increase in January.
Mixed signals on consumer delinquencies
Despite the persistent growth in card debt, consumers are still managing their debt responsibly – depending on how high their individual card balances are.
The American Bankers Association reported this week that 30-day delinquencies on bank-issued credit cards fell to a three-year low in the fourth quarter of 2017.
Additionally, delinquencies on all types of installment loans tracked by ABA fell for the first time since 2012. These include car loans, home equity loans, personal loans and others.
“Consumers have done a remarkable job of managing their finances over the last several years, and we expect that will continue as the growing economy reinforces their financial footing,” said ABA Chief Economist James Chessen.
But recent data from the Fed tell a slightly different story. A February report by the New York Fed suggests customers with higher balances are more prone to delinquencies of 90 days or more.
The rise in card balances has been a mixed bag for U.S. consumers, but paychecks continue to increase on the whole. The Bureau of Labor Statistics reported that personal income rose 0.4 percent in February, while spending increased by 0.2 percent. Meanwhile, wages grew by 8 cents in March, and the U.S. economy added 103,000 jobs. The unemployment rate held steady at 4.1 percent for the sixth straight month.
Three more rate hikes possible this year, starting in June
High card balances are becoming especially costly as the Fed continues to hike interest rates. The Federal Open Market Committee (FOMC) voted at its March meeting to raise the benchmark federal funds rate by a quarter percentage point to a range of 1.50-1.75 percent – the sixth such rate hike since December 2015.
The Fed currently projects two more rate increases to come this year, but some analysts think three are more likely. For instance, BMO Capital Markets Senior Economist Jennifer Lee said she expects rate hikes in June, September and December.
And the Fed’s latest projections show only one FOMC member needs to increase his or her midpoint benchmark rate projection by 0.25 percent to establish three rate hikes as the committee’s median projection for this year.
“That looks like a very good bet for June,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a March 21 note.
Many issuers raised APRs on their cards in lockstep with the new hike, and the national average APR soared to 16.62 percent, according to the CreditCards.com Weekly Credit Card Rate Report.
See related: Fed: Card balances grew by $1.5 billion in January