WASHINGTON (4/7/14)--While consumers have racked up higher credit card bills lately, they've also paid those balances down at a higher rate, according to the American Bankers Association's Credit Card Market Monitor, released last week.
Ending balances dropped by nearly 5% in the third quarter of last year, while credit card purchases generally grew, the report found.
"This suggests that consumers aren't just using their credit cards more, they are also more likely to pay off their monthly balance," said Kenneth J. Clayton, ABA's Card Policy Council executive director (American Bankers Association April 2). "As a result, the amount consumers are paying in interest as a share of their outstanding credit card balance declined for the 13th consecutive quarter."
The report also found credit card users are spending more on discretionary goods and services, or the nonessentials, as discretionary spending levels jumped 3.5% year-over-year. Nondiscretionary spending climbed 1.4% as well.
"(Consumers are) less concerned with the direction of the economy and their ability to keep debt at manageable levels," Clayton said. "Whether this trend will continue remains to be seen."
Credit cards tied to reward programs saw a 7.8% increase year-over-year, the report revealed, perhaps in part explaining the uptick in overall credit card spending. Clayton noted that increases in both spending and reward card use is beneficial for retailers and the broader economy.