Americans’ revolving credit balances rose the least in nearly two years in February, data released on Friday afternoon showed.
The $5 billion increase from January counted as the smallest month-to-month rise since April of 2021, when inflation took off in earnest. January’s increase was revised markedly higher. The data isn’t adjusted for prices.
A simplistic read would be to suggest the reported deceleration in February is evidence of lower goods prices, consumer exhaustion, reluctance to take on additional high-interest, floating rate debt or a combination of the three.
The problem with assessments which assume a disheartened consumer is always the same: America is a nation of incorrigible spendthrifts. Notwithstanding the Fed’s best efforts to throttle demand, the legacy of the pandemic “wealth effect” is still with us, and fully capable of manifesting in bouts of rapacious spending. Betting against the US consumer is usually a fool’s errand.
The same Fed release showed commercial bank interest rates on card plans now exceed 20%. They were 14.5% in February of last year, on the eve of the first Fed hike.
Overall, consumer credit rose $15.3 billion in February, below estimates. Total revolving credit stood at $1.22 trillion.
On a YoY, percentage basis, revolving credit rose 15% in February. That was lower than January’s 15.7%, which was the swiftest YoY rate since August 1996.
February marked the 23rd straight monthly increase overall. Revolving credit balances have risen every month since inflation began to rise materially in the US.
I’m always compelled to offer the same general assessment: While it’s true that some borrowers (i.e., the smart ones with the financial wherewithal to conservatively manage their affairs) pay off their cards regularly, and although Americans are allegedly still sitting on sizable pandemic cash “buffers,” the fact is, a lot of people have a lot of revolving debt, and rates are 20%.
The sticker shock from 20% credit card interest rates is likely a major factor. Some 75% of the US population has never seen such a thing before.
Updating Talleyrand: “Never underestimate the power of human stupidity.”
I remember the late 1960s CC interest rates through the 1980’s, man! what a ride.
that’s my foundational and ongoing thesis of the majority of American (worldwide…?) voters…
My wife and I got our first credit card in 1968. It was a BankAmericard (now called Visa). It was owned and franchised by the Bank of America. It just showed up in our mailbox one day for no reason I could tell. The rate was 1.5%/month — 18%. I have always assumed rates on cards stayed at that rate. What I have never noticed before is anything but 18%. I always pay off my balance so no cost to me.
One of the things you don’t factor into your analysis is the amount of people like myself who do balance transfers for 0% for 6-15 months for 0-3% transaction fees.
“While it’s true that some borrowers (i.e., the smart ones with the financial wherewithal to conservatively manage their affairs) pay off their cards regularly…”
Actually you are very conservative. Thou I have never had a monthly balance on these cards I have a couple that are 29%.