After years of deleveraging, many American households seem to have regained their appetite for debt. This has many implications for the U.S. economy, including for auto dealers, who have generally been having a terrific year, and for realtors, who are still waiting for a significant bounce back in home sales.
Even credit cards are becoming popular again. According to Moody’s Analytics, credit card balances peaked in 2008, fell into 2010, then held steady until this year. Credit card balances are up about 4 percent on a year-over-year basis, and there are reasons to believe that credit card balances will continue to rise. First, faster job creation, lower unemployment nationally and lower gas prices have helped to boost consumer confidence, which often translates into more spending via credit cards. Second, credit is again becoming increasingly available.
Credit card utilization rates have been near record lows for all but the most credit worthy borrowers in recent years. Among prime borrowers, those with credit scores in excess of 700, utilization rates are higher now than they were before 2009. But for certain categories of borrowers, utilization rates recently hit record lows. That will likely change as lenders begin to distribute more credit cards going forward.
