Credit card balances took a dive in 2020. They are now on the rise and heading back to pre-pandemic levels. Just before the pandemic started, credit card balances stood at $923 billion. The previous peak was around $870 billion at the beginning of 2008 (i.e., start of the Great Financial Crisis).
For Q3 of 2021, credit card balances came in at $800 billion, or $123 billion below pre-pandemic levels. Despite this, Q3 marks the second quarter in a row of gains, with Q3 adding $17 billion, according to the Federal Reserve Bank of New York. Credit card balances troughed at the beginning of 2021 and have been rising since.
Compared to Q3 of 2019, US consumer debt was $1.1 trillion higher, coming in at $15.2 trillion. Consumers hold 520 million credit accounts, providing $3.2 trillion in available credit. During the second quarter of 2021, 51% of active accounts carried a balance, according to data from the American Bankers Association.
The 30-day delinquency rate rate dipped by 0.01% to 1.57% for Q3 2021, which is the lowest number since tracking began in 1991.
The impact of growing credit card balances was felt in the October retails sales report. October retail sales jumped by 1.7% for a year-over-year change of 16.3%. Given that the consumer savings rate is back to pre-pandemic levels, stimulus checks have ended, and extended unemployment benefits are over as well, how did the consumer do it? The answer is credit cards.
Although not just credit cards. Increasing wages played a part as well. We also have the monthly child tax credit providing some spending power for consumers.
Despite recent downward trending consumer sentiment surveys, increasing credit card balances say consumers are confident about the future. The expectation is that credit card balances will soon reach pre-pandemic levels.