Credit Card Balances at CUs Rising Sharply, New Data Shows

Credit unions and other lenders saw strong gains in credit card balances from April to May, in another sign consumer spending is rebounding from the pandemic.

The Fed’s G-19 Consumer Credit Report released Thursday showed credit unions held $60.6 billion in credit card debt in May. The total is still down 0.9% from a year earlier and down 7.1% from the pre-pandemic month of February 2020. However, it rose 3.4% from April to May — the first month-to-month gain since December 2020 and the strongest monthly gain since December 2019.

Historically, May is the third-strongest month for credit card spending after the holiday months of November and December. Balances typically rise 1% from April to May, based on averages of Fed data from 2010 through 2019.

Balances typically fall from January through March, and begin rising in April.

But after COVID-19 was declared a pandemic March 11, 2020, historical patterns dissolved as the nation entered a recession with little precedent. As savings rates soared, credit card balances fell steeply.

Credit unions’ gains in credit card balances in May were also better than other lenders, allowing credit unions to improve their share. They held 6.5% of U.S. credit card debt in May, compared with 6.4% in both April 2021 and in May 2020.

Banks held $836.9 billion in credit card debt, down 2.2% from a year earlier and down 11.5% from February 2020. However, it was up 2.1% from April to May. Banks’ share was 89.8% in May, compared with 89.8% in April and 89.7% in May 2020.

The Fed report coupled with CUNA’s Credit Union Monthly Estimates report released this month also showed credit unions held $52.1 billion in unsecured consumer term loans in May, up 6.3% from May 2020 but down 2.2% from April. Those numbers were influenced by Paycheck Protection Program (PPP) loans, which began in April 2020, because the NCUA requires their value to be reported in that category. They will be disappearing from the books as the SBA forgives them, as planned.

However, CUNA found other signs of the improving financial health of members in May:

• Credit unions held $392.8 billion in total car loans as of May 31, up 1.2% from April to May, their strongest showing since May 2018 when growth was 1.8%.
• Savings fell 0.5% from April to May, the first decline since December 2019 in the pre-COVID-19 era. Members began saving feverishly after COVID-19 was declared a pandemic in March 2020, which economists have said is usually a signal of a recession.
• Improvements in lending coupled with the drop in savings allowed the loans-to-savings ratio to rise from 68.6% in April to 69.5% in May — the first month-to-month improvement since November 2020.