Consumer revolving debt is on the rise again, but it is still too early for lenders that earn profits on outstanding debt to exhale.
Credit card debt, which comprises the majority of revolving debt, in December rose for the fourth consecutive month, according to Federal Reserve Board data released Feb. 7. Economists have noted that revolving debt generally declined through 2009 and 2010, cutting into lenders’ profits (
Total outstanding consumer revolving debt during December rose slightly to $801 billion, according to the Fed’s preliminary monthly G.19 report, up about $3 billion or 0.35% from $798.2 billion in November. Revolving debt stood at $792.7 billion in October, according to Fed data.
Noting seasonal trends, a good portion of consumer debt accumulated in December could be short-term, Ezra Becker, TransUnion vice president of research and consulting at Chicago-based credit bureau TransUnion LLC, tells PaymentsSource.
“Retail sales were strong during the fourth quarter, and a lot of people may have put purchases on their credit cards with the anticipation of paying it off relatively soon with tax refunds or bonuses,” Becker says.
But there is also growing evidence that more consumers are borrowing, and if consumers continue spending, revolving consumer debt may gradually be reversing its long slide, he suggests.
“Lenders are giving out more credit and originating more new credit card accounts, which is part of what we are starting to see in the revolving debt figures,” Becker says. “For awhile revolving debt was actually contracting, and that is no longer the case.”
Total new bankcard accounts rose 14.2% during 2011 compared with the total number of new accounts in 2010, according to TransUnion data.
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