CUNA: Loan Balances Swell, Savings Taper in January

Credit union loan balance growth continued to accelerate in January, while savings slowed, according to CUNA.

The exceptions were credit cards, which can be blamed on seasonal patterns, and new cars, which have been lagging since the end of 2019.

The Fed’s G-19 Consumer Credit Report released Monday showed credit card balances, while up 7.4% from a year earlier, made a typical 0.8% drop from December to January.

Typically, the biggest month-to-month drops in credit card balances are in the first two months of the year. Fed data showed declines averaged 0.8% for December to January and 0.9% for January to February from 2016 to 2020.

NAFCU Chief Economist Curt Long said January’s drop in credit card balances was the result of households paying off balances built up in the holiday shopping season.

Long said the Fed data shows total consumer credit for credit unions, including auto loans and other term loans, rose 0.3% on seasonally adjusted basis from December to January, compared with a 1.0% fall for banks.

“NAFCU expects demand for consumer credit to pick up as households deal with spiking gas prices,” Long said.

While December’s $65.7 billion balance for credit cards was slightly higher than the pre-pandemic balance in February 2020, January’s decline to $65.2 billion put it back under that mark.

Banks held $919.1 billion in credit card debt, up 9.3% from a year earlier, but down 2.6% from December.

Credit unions’ share of credit cards was 6.4% in January, compared with 6.3% in December and 6.5% in January 2020.

CUNA’s Monthly Credit Union Estimates showed unsecured consumer term loans (excluding credit cards) grew 6.8% to $55 billion from a year earlier, and rose 2.5% from the previous month.

New car loans fell 0.7% to $143.4 billion from a year earlier, and rose 0.7% from the previous month. Used car loans grew 11% to $268.7 billion from a year earlier, and rose 1.2% from the previous month.

The biggest strength again came from first mortgages, which grew 11.5% to $587.8 billion from a year earlier, and rose 0.5% from the previous month. Part of balance growth in the second half of last year came from reduced sales of first mortgages to the secondary market.

Second-lien mortgages fell 0.7% to $85.3 billion from a year earlier, but rose 2.2% from the previous month.

The savings boom has continued to subside. Savings, which rose 20.3% in 2020, rose 12% over 12 months to reach $1.82 trillion on Jan. 31. Savings were down 0.1% from December.

Month-to-month drops are not unusual for savings. For example, although savings rose 8.1% in 2019, there were six months that year when savings balances declined. However, since COVID-19 was declared a pandemic in March 2020 and until December 2021, only one month had a drop: 0.5% in May 2021.