Credit Card Debt Plummets in February After a Revised Gain in January

Total credit card debt outstanding in the U.S. continued to fall in February, according to numbers released Wednesday by the Federal Reserve. Overall consumer credit also dropped, shocking many analysts and economists who were expecting modest gains.

The Fed said that credit card debt — called revolving debt in the report – dropped 13.1 percent in February, on an annualized basis. In dollars, outstanding revolving debt fell $9.5 billion in the month. The Fed’s monthly consumer credit statistical release, also called G.19, showed a revised increase of 2.1 percent in credit card debt in January; the last report indicated a preliminary drop of 2.3 percent.

At the end of February, total outstanding revolving debt was $858.1 billion, a level not seen since September 2006. Since its peak in September 2008, credit card debt has declined $117.6 billion, with most of the decline due to bank chargeoffs (“Chargeoffs a Key Driver in Declining Credit Card Balances,” Sept. 23, 2009).

Non-revolving debt – like car, student or personal loans – fell at a 1.6 percent annual rate in February.

Overall, U.S. consumer credit contracted at a 5.6 percent annual rate in the month after posting a revised gain of 5.2 percent in January. The Fed’s G.19 report does not track debt backed by real estate.

Many experts had been expecting gains. Analysts polled by Reuters had forecast consumer credit would rise by a modest $500 million in February.

The stock market reacted poorly to the news, turning further into the negative territory Wednesday after the announcement. Some analysts take the news as a sign that consumer spending, or access to credit, has not rebounded to a point where it can sustain an economic recovery.

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