For The First Time Since August 2008, Credit Card Debt Hits A Plateau

While many celebrated the record high US household wealth in the latest data from The Fed, what most missed was a record $1.0 trillion of credit card/revolving loans, a record $1.3 trillion of auto loans, and a record $1.5 trillion of student loans.

As we previously noted, among these, credit card and auto loans, in particular, have been experiencing accelerating delinquencies, but the very gradual increase in aggregated Net Charge-Offs has allayed any economist concerns about the state of the US consumer. But, a modest scratch below the surface, and a surprising discovery emerges.

While the larger U.S. banks that dominate credit card issuance have focused on prime and super prime consumers post the Great Financial Crisis (GFC), and have enjoyed a prolonged period of low charge off rates concurrent with the Fed’s almost decade long ZIRP (Read more detailed breakdown here.), the charge-off rates among the nation's smaller banks, those outside the Top 100, have seen the charge-off rates soar.

And now, based on this month's consumer credit data from the Fed, which saw an unexpectedly small increase in consumer credit of only $11.5BN, below the $15.2BN expected, and down from $13.6BN last month, it appears this reality is starting to hit home, as March consumer credit rose at the slowest pace since September...

... as outstanding credit card borrowings unexpectedly declined by $2.6BN, the most since the end of 2012, after a drop of just over $500MM last month.

As the chart below shows, the two consecutive months of credit card deleveraging means that the until recently relentless increase in revolving credit appears to have again hit a plateau. The last time this happened? August of 2008 (the sharp move in December 2015 was simply a data revision).

While it is painfully obvious, as Bloomberg adds, "the 0.9 percent annualized decline in first-quarter credit-card debt outstanding shows a waning appetite for borrowing after a 10.3 percent surge in the final three months of 2017."

To summarize the results:

  • Total credit increased $11.6b (less than the expected $15.2b).
  • Revolving credit outstanding dropped $2.6b MoM, after a $515m decrease in Feb.
  • Non-revolving debt outstanding climbed $14.2b for a second month

The results are consistent with first-quarter data that showed household spending cooled following a strong run of gains. All that dis-saving (and credit-card-debt engorgement) managed to spike consumer confidence to near record highs...

It also confirms that with the US personal savings level once again near all time lows, and with households no deleveraging on their credit cards, the second quarter is about to get very ugly for the economy which is 70% driven by consumer spending. 

There was a silver lining: non-revolving credit - auto and student loans - rose by a solid $14.2BN as household continued to just charge their assorted college-linked purchases not to mention car purchases. In fact, as the latest Fed data shows, both auto and student loans hit a new all time high of $1.52 trillion and $1.118 trillion, respectively.

And so, Americans may be going broke, but at least they'll have a college degree and a car - both bought on credit - to show for it.

 

Comments

GreatUncle American Sucker Mon, 05/07/2018 - 17:47 Permalink

You do not borrow to buy food, energy or housing.

If you borrow to do this you pay the bankster and then guess what?

You have even less food, energy or housing tomorrow... fucking pointless better to rob the bankster and pay bills.

So if not robbing a bankster the starvation, freezing to death and having no roof is the preferred option here.

Expecting it to happen one day very soon.

 

 

In reply to by American Sucker

Silver Savior Ben A Drill Mon, 05/07/2018 - 19:05 Permalink

Why would they go away? They will just be denominated in the new currency. When people spend EBT for products the corporations win. Corporations realize no one has any money hense the expanded list of businesses that take EBT.

I kid you not the local hippy coffee shop takes EBT and has signs up saying so. Over priced pasteries and ready made coffee products are now ok to use EBT on. (California).

I think it's a good thing. I like it that people are on EBT. I am not yet but really want to be. I am retiring from retail at 38. 

In reply to by Ben A Drill

Angry Panda Mon, 05/07/2018 - 16:06 Permalink

Easy fix just moar credit. 1 billion limit for everyone. That'll stimulate the economy. Just imagine what you can buy with $1 billion limit on your CC.

GreatUncle Angry Panda Mon, 05/07/2018 - 17:55 Permalink

Lol I would take it if I am first in the queue because I would splash the whole $1B on real gold and watch SHTF.

Motto is if you are last in line you are sooooooooooo fucked.

Yep just checked my ticket ... last but one so I am well fucked even on a $1B handout.

Tell you what, the bankster that offers the deal needs to have a boating accident and if anybody question just say he was chasing down rumours of gold lost in boating accidents ... oh what a shame.

In reply to by Angry Panda

the_river_fish Mon, 05/07/2018 - 16:07 Permalink

Although US consumer and commercial debt has hit record highs, charge-off and delinquency rates remain at low levels

Here are all charts and statistics: https://thistimeitisdifferent.com/us-bank-debt-apr-2018

And talking about debt, have you looked at the growing mortgage debt outstanding of Australia (96% of GDP) and Canada (102% of GDP) amongst others? This is just mortgage debt

https://thistimeitisdifferent.com/mortgage-outstanding-may-2018

BrigstockBoy Mon, 05/07/2018 - 16:10 Permalink

What's it going to take for the house of cards that is John Q. Public to crash and burn? Leveraged to the gills, little to no savings. Living paycheck to paycheck.

paulbain BrigstockBoy Mon, 05/07/2018 - 16:43 Permalink

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BrigStock boy wrote:

What's it going to take for the house of cards that is John Q. Public to crash and burn? Leveraged to the gills, little to no savings. Living paycheck to paycheck.

 

The house of cards will probably collapse during the next economic recession, which ain't too far away.  I suspect that the next recession will occur before 2021.  Be patient.  The crap will hit the fan soon enough.

 

 

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In reply to by BrigstockBoy

American Sucker Mon, 05/07/2018 - 16:11 Permalink

Guys, I'm barely paying down my student loans while my credit card debt climbs every month.  But I'm only one man, and I need your help.  Together we can get credit card debt moving again.

Seasmoke Mon, 05/07/2018 - 16:40 Permalink

This must be bullshit. I still have 10 Credit Cards in my wallet. Just need them to raise the limits. Simple. 

 

And to be serious, I have a bunch of Loan scammers begging to loan me 5000 each. It’s ridiculous.