How Consumer Credit Card Balances Are Changing in Today’s Uncertain Economy

CONSUMERS ACROSS THE BOARD are feeling the impact of record inflation and continued economic uncertainty. Yet, despite ongoing debates as to whether the nation is currently in a recession, the data shows that the country is experiencing a very healthy credit environment, with strong, low-risk originations in most asset classes.

Equifax is continually tracking consumer and commercial credit trends with robust data insights to help contextualize macroeconomic events.   

Card originations, limits and utilization start to increase 

It’s no secret consumer spending saw its fair share of changes during the height of the  COVID-19 pandemic, underscored by dips in both bankcard limit originations and bankcard unit originations seen in 2020. Now with a new set of challenges jarring the U.S. economic nervous system, those credit trends are changing. Bankcard limit originations are now above pre-pandemic levels, with subprime share growing steadily, and the number of new cards originated above all prior year levels since 2011. Total credit-card balances- defined as a combination of bankcards and retail cards (commonly known as store-branded cards)  in the U.S. hit $916 billion in September, nearly identical to December 2019 levels.

The latest proprietary research from Equifax also shows that revolving debt in August 2022 is seasonally above 2019 levels, and non-revolving debt is continuing to rise. From a utilization standpoint, credit limits for bankcards have continued to rise, while credit limits for private label cards have stayed roughly the same since last year. And despite being lower than they were pre-pandemic, the utilization rates for both bankcards and private label cards are starting to rise.

“But as we dive into the data and start doing segmentation, we have seen an increase in utilization as it relates to the subprime sector,” continued Aliff. 

How these trends are affecting consumers 

When it comes to payment hierarchies - looking at it broadly, knowing that consumers have varying levels of credit lines and debt - where and how consumers prioritize their defaults  is changing, as they navigate personal recessions of their own. 

At the end of the day, although credit card balances can be strong economic indicators, businesses and consumers both can benefit from looking at consumer credit trends as a whole, from mortgages to auto loans and beyond. For more trends in credit risk, debt, utilization and delinquencies from around the world, please view our Global Credit Trends.