Slower Credit Card Usage brings More Delinquency

by Brian Riley 0

Credit Card

Today’s MarketWatch, a WSJ publication, calls out slow growth in consumer credit during March, with a seasonally adjusted rate of 3.6%.  This was the lowest since September 2017.

  • Revolving credit, namely credit cards, fell 3%, marking the second drop in a row.

  • (Growth is still) Narrowly holding above $1 trillion.

It took a lot to get back to a trillion dollars. You may recall reading about how revolving debt grew, as reported by the Federal Reserve.  The Fed has been tracking revolving debt since January 1968, the Lyndon Johnson era.  It took 50 years to scale from $2.8 billion in January 1968 to $1.0 trillion, in December 2008, if only to have the recession forced the revolving debt metric down to $789 billion in March 2011.  However, as Americans do, debt grew back up to $ 1 trillion in November 2017 as we prepared for the winter holidays.

Does negative growth trends suggest $1 trillion is the market peak for US Consumer Debt?

You will find plenty of relevant content in Mercator’s research catalog on the impact of stalled portfolio growth, and why we anticipate rising delinquency will further impact card profitability.  Collection increases will bring more challenges to issuer portfolios than growth.  Increased writeoffs will directly decrease card profitability.

At the same time, student loans and auto loans grew.  Student loans advanced from $1.1 trillion to $1.2 trillion.  Both asset classes have been outpacing credit card debt for several years.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group