Posts by Ed Kountz from August 08, 2008

Ed Kountz | August 08, 2008, 09:48 AM
Fed Data - Strong Growth in Credit Card Borrowings Continue

US consumers who received one of the 105 million-plus economic stimulus checks mailed through mid-July apparently aren’t using those funds to pay down debt. The Federal Reserve’s latest G.19 report, released this week, indicates that revolving credit (mainly credit card debt) increased at an annualized 6.8 percent rate during the month of June. While that rate is slightly lower than the 7.6 percent rate the Fed reported for May 2008, it is still at the higher end of revolving debt increases in recent years—and about double the rates seen for revolving debt in 2003 (2.9 percent), 2004 (3.8 percent) or 2005 (3.1 percent). In dollar terms, the Fed estimates that the total outstanding in revolving credit comes to $968 billion.

LINK

It’s clear that, rather than a single driver, several factors have come together to influence the trend. First, consumers stung by the credit crunch…no longer able to use their houses as ATMs…may be turning to credit cards to make up some of the difference. I blogged on the reported impact of this at several of the leading issuers HERE

So too the rise in prices for basic goods, making payment methods that free consumers up from the limitations of cash-in-hand seem more attractive. It’s unclear that this is impacting debit—which given ties to the DDA acts something like cash in hand, and for which average transaction volumes tend to be lower—but we will be watching the issue thru the rest of 2008.