Consumers Shrinking Debt as CUs Increase Credit Card Share
Both banks and credit union portfolios continue post-Pandemic slide in August
Households cut back further on their credit card debt in August, with portfolios shrinking twice as fast at banks than at credit unions, according to a Fed report released Wednesday.
The Fed’s G-19 Consumer Credit Report showed credit unions held $61.2 billion in credit card debt on Aug. 31, down 4.7% from a year earlier. Banks held $849.7 billion in credit card debt on Aug. 31, down 9.7% from a year earlier.
The Fed’s release of credit card data unlocks CUNA’s estimate for unsecured consumer term loans, showing they grew 12.4% to $52 billion as of Aug. 31. It’s an improvement from a year earlier, from Aug. 2018 to Aug. 2019, when consumer loans grew 8.8%.
Another bright side for credit unions was a bigger slice of the shrinking credit card pie. Their share of credit card debt was 6.5% in August, compared with 6.4% in July and 6.1% in Aug. 2019. Banks’ share of credit card debt was 89.5% in August, compared with 89. 6% in July and 89.7% in Aug. 2019.
Credit cards had been a rising source of loan growth for credit unions before COVID-19 was a declared a pandemic March 11. From Aug. 2018 to Aug. 2019, the Fed shows their card balances grew 7.5%.
PSCU weekly reports on the number and dollar volume of credit card transactions also showed a sharp decline after the pandemic and into the summer, but the numbers started turning positive in August.
The St. Petersburg, Fla.-based payments CUSO’s Transaction Trends Update showed credit card spending was down 1.5% for the four weeks ending Aug. 38, but grew 4.3% in the four weeks ending Sept. 27.
The Fed report showed lenders of all types held $949.9 billion in credit card debt on Aug. 31, down 9.5% from a year earlier.
July-to-August changes were favorable for credit unions but unfavorable for banks.
Credit card balances grew 0.9% from July to August this year at credit unions, compared with a one-month drop of 0.3% a year earlier. Banks’ saw a 0.4% drop from July to August compared with 0.7% gain a year earlier.