After Record Debt-Fuelled Splurge, US Credit Card Usage Post Sharp Slowdown

After a massive surge in consumer credit in the last three months of 2017, when October thru December saw a massive increase in revolving and non-revolving credit, amounting to a total $73 billion, the Fed reported that 2018 started off with a whimper, with a modest $701 million increase in credit card debt, coupled with a $13.2 billion increase in non-revolving, or auto and student loan, credit in the first month of the year.

Revolving credit was the clear outlier, with the monthly increase of $0.7BN far below December's $6.1BN and last January's $934 million, and the smallest increase since February 2015 (excluding the December 2015 series revision). Still, the increase pushed the latest revolving credit total to $1.0298 trillion, a new all time high.

Meanwhile, non-revolving credit, which with the exception of one definition change month, has not gone down since 2011, also hit a new all time high of $2.825 trillion, following the latest monthly increase of $13.2 billion, fractionally higher than last month's downward revised $13.1 billion.

What about its components? Well, with everything else going for record highs, we doubt it will be a surprise to anyone that both student debt and auto loans hit a new all time high in the quarter ending December 2017, with $1.491 trillion for the former, and $1.12 trillion for the latter (the next monthly update will take place in two months, when the Q1 data is released).

The sharp slowdown in consumer credit growth may be the latest red flag for the US economy, which as a reminder ended 2017 with a record surge in credit-funded spending; and now that credit card companies demand payment, US consumers - whose personal saving rate is already near record lows - appear to have retrenched, and have substantially slowed down their credit card usage, which for an economy in which 70% of GDP is consumer spending suggests more negative surprises for Q1 GDP.

Comments

Mr. Guts Wed, 03/07/2018 - 15:31 Permalink

Maybe people have finally had enough extruded red plastic shit delivered from Chinese container ships. Slow down your spending, starve the machine. 

shovelhead Wed, 03/07/2018 - 15:35 Permalink

Looks like everyone enjoyed their Christmas.

We did around here but we used cash. I warned my kids if they used credit for gifts I would beat them bloody. They didn't so I didn't.

 

abgary1 Wed, 03/07/2018 - 15:35 Permalink

If we go back to living in a cash world several things happen: We avoid personal debt and we protect our privacy.

Cash means freedom!

Endgame Napoleon abgary1 Wed, 03/07/2018 - 16:37 Permalink

I agree with you about the privacy aspect. But you, apparently, have never had the unpleasant experience of working in dangerous areas of cities, trying to meet your quotas, while doing 17 things at once to retain the accounts of an often justifiably emotional clientele being s******d by the rigged system, including an absolute ton of fast-paced cash handling. Not only is it dangerous and low paying, but while being attentive to customers and the legalities of their policies, you must remember to lock your cash drawer after each and every transaction in some locations. Cash is dangerous. Cash is more vulnerable than a card, explaining the popularity of cards. There is a major difference in handling cash in posh luxury workplaces, where it has all the advantages and none of the disadvantages, and the other side. Sadly, people who are forced to live in those unsafe areas often have no choice but to use cash, and it is dangerous for them, especially the women who are easily overpowered. Cash: it is not so simple. 

In reply to by abgary1

Endgame Napoleon Rainman Wed, 03/07/2018 - 16:43 Permalink

When used responsibly, cards are a great convenience. They should have more financial literacy courses in schools, but then, the same working-in-my-safe-government-job-with-summers-off-for-my-kids people would teach it, using a monotone, while counting down the hours before they leave work. The kids would not listen. So, it would probably be a waste of taxpayer money, getting the country in even more debt. 

People may have curbed their purchases, expecting interest rates to rise more.

In reply to by Rainman

Endgame Napoleon JibjeResearch Wed, 03/07/2018 - 16:48 Permalink

I have always had an old car. Honestly, even if I had money, I would just keep on driving it. I have never cared what anyone thought about my car, although I can see the design value in some cars. I can enjoy looking at them on the road. I do not have to own them. Most people have to prioritize what they spend any extra money on, not that most Americans have any extra money these days.

In reply to by JibjeResearch

Seasmoke Wed, 03/07/2018 - 15:54 Permalink

I know a few people I just spoke with in the last month with 700 + scores and every CC maxed out and can not get another $1 of credit. They are getting very worried and I didn't have much good advice for them. Other than than just walkway from those made up from air balances and never look at them again.

tahoebumsmith Wed, 03/07/2018 - 16:04 Permalink

Usage of Credit Cards is down because everbody is maxed out pretty simple to understand the economics if you look at the overall debt balance at record highs

Dragon HAwk Wed, 03/07/2018 - 16:05 Permalink

Women start shopping for Cmas in October. everyone clams up  in January because they know all the Christmas Bills are coming, been like this forever the trend just keeps getting worse.

GotGalt Wed, 03/07/2018 - 17:00 Permalink

I know I'm a fool (at least in the short to medium term) for continuing to live debt free, but it's the only way I can sleep well at night.  Neither a lender nor borrower shall I be.  As a result, I'm the one who is NOT taking 5 star around the world vacations each year, driving a fancy German auto, dating a female 20 years my junior who just wants to have (expensive) fun, nor am I keeping up with the Jones' in any other way.  Just a simple life focusing on the simple pleasures.

107cicero Wed, 03/07/2018 - 18:09 Permalink

This is news?

Its one month after Xmas and people are spending less on their credit cards?

Really?

Pleaze...

Lets get some real news....