Home » CU consumer credit up, card use down in Feb.
CU consumer credit up, card use down in Feb.
April 7, 2015
WASHINGTON (4/8/15)--In line with national trends, consumer credit at credit unions climbed in February, rising $3.3 billion to $307.8 billion for the month, according to numbers released by the Federal Reserve Tuesday.
This marks an acceleration from the $1.7 billion increase seen in January from December.
For all major credit holders in the United States, consumer credit jumped by $15.5 billion during the month, after rising by $10.8 billion in January.
Nonrevolving credit, tied to financing for big-ticket items such as automobiles and education, drove the gains for both credit unions and all major holders.
At credit unions, nonrevolving credit rose by $4.1 billion for the month to $262.4 billion, while revolving credit--associated with credit card use--fell by $900 million to $45.3 billion.
The trend of declining card balances may be because consumers are paying off debt instead of putting money away in low-interest savings vehicles.
"As people start to accumulate a little extra funds, in the old days if their checking account was getting bigger, they would transfer some over to savings and then maybe from savings to CD, or something like that, but since those interest rates are so low right now there's not much value in that," Bill Hampel, CUNA Chief Economist and Policy Officer, told CreditCards.com (April 7). "Instead they are putting money toward credit card debt. I think that's been inhibiting revolving credit growth for a while and will continue until short-term interest rates rise."
Similarly, nonrevolving credit increased by $19.2 billion for all major holders, while revolving credit slipped by $3.7 billion.
"Drivers saved at the pump in February thanks to low gasoline prices, which reduced total dollars spent via credit cards," said Thomas McCartin, Moody's analyst (Economy.com April 7). "In addition, proactive tax payers began to receive their refunds, which allowed them to pay off debt."
Nonrevolving balances, which haven't fallen on a monthly basis since August 2011, increased by 8.3% on a year-over-year basis in February, while revolving balances fell by 3% annually.
"Nonrevolving credit remains upbeat as consumers continue to purchase automobiles at a rapid rate," McCartin said. "However, mortgage originations are still low as a large share of home sales are going to cash buyers and existing homeowners looking to upgrade or downgrade."