Consumer credit card debt increased slightly in March by about $2 billion, marking only the second such monthly increase since 2008, according to data the Federal Reserve Board released May 6.
Consumer revolving credit, 98% of which is credit card debt, in March totaled $796.1 billion, up 0.24% from $794.2 billion, according to the Fed’s monthly G.19 report.
Credit card borrowing generally has declined for more than two years as consumers have steadily paid down debt and taken out fewer credit card loans, analysts say. Consumer credit card debt also ticked up in December 2010, but in January resumed its decline (
Recent incremental increases in the overall pool of consumer credit card debt is insignificant, although issuers likely will originate more new credit card accounts during the second half of this year as the economy continues improving, Moody’s Investors Service analysts tell PaymentsSource
Nevertheless, Moody’s noted in a May 9 report that it expects credit card losses to decline further this year, so in 2012 the average consumer credit card charge-off rate could fall to as low as 4%, which would mark a 20-year low.
Charge-offs have fallen sharply within the past 12 months as issuers have written off debts from their weakest borrowers “and these borrowers are unlikely to get access to unsecured credit anytime soon,” Moody’s said in its report.
Moreover, as weaker borrowers have exited lenders’ pools, issuers over the past two years have added fewer new accounts because of tighter underwriting requirements and lower overall credit card account demand, the firm said.
Consequently, the miax of borrowers remaining in issuers’ portfolios “are generally of higher credit quality and will drive better portfolio performance” in the foreseeable future, Moody’s said.
And when issuers begin to add new accounts, they likely will target lower-risk, more stable borrowers at first because the economic recovery is expected to be slow and gradual, the firm noted.
As a result, issuers likely will not accumulate higher-risk borrowers “in any substantial way for the [next] couple of years,” Moody’s said.
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