Consumers Unexpectedly Paid Down Their Credit Cards For A 4th Straight Month, Have "Uncharged"A Record $127BN In The Past Year

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by Tyler Durden
Friday, Mar 05, 2021 - 03:15 PM

There appears to be a major discrepancy between BofA's in house debit/credit card data, which showed a remarkable increase in credit card-funded spending in both January and February (the Texas-freeze induced drop notwithstanding)...

... and the Fed's own consumer credit data aggregation, because according to the latest Consumer Credit (G.19) report, in January  revolving debt, i.e., credit card debt, shrank for a fourth consecutive month declining by a whopping $9.9BN following a $2.8BN drop in December, $465MM drop in November and a $5.3 billion drop in October. In fact, this was the 10th decline in consumer credit in the past 11 months!

This means that in the past 12 months, US consumers have paid down a record $126.5Bn in credit card debt, a staggering amount for an economy that runs on credit.

The flip side, as usual, is that as revolving credit dropped, non-revolving credit rose like clockwork (if far more subdued than usual), and in January US consumers increased their student and auto loans - the two largest component of this category - by a far lower than expected $8.6 billion, down from $11.6BN in December...

... and bringing the total January consumer credit change to a decline of $1.31 billion, which was not only far below the $12BN increase expected by economists, but was the first decline in total consumer credit since August!

Meanwhile, and there was no surprise here, the total dollar amount of both student and auto loans hit a new all time high in the 4th quarter of 2020, with the former rising by $2.5BN to a new all time high of $1.707TN and the latter rose $9BN to $1.228TN.

This means that even as Americans have turned spectacularly thrifty on their credit cards - paying down debt in record amounts - they continued to go to town on loans made where either the Federal Government/US taxpayer  has some implicit backstop, such as student loans which will likely be discharged in part or in whole by the Biden admin, or where they used the cash to buy cars, which is also understandable when one can take out a loan which maturity is well beyond the viable life of the actual (used) car being purchased. The implication in both is that nobody - neither the lender nor the borrower - expects that the loan will ever be repaid, something which can't be said about credit card debt (at least for now).