Economic growth in the U.S. continues to be driven in large measure by increases in consumer spending. Many economists expect consumers to remain the economy’s principal source of momentum, in part because they anticipate rising credit card use.
As indicated by Moody’s Analytics, revolving credit balances, nearly entirely comprised of credit card balances, declined nearly nineteen percent from mid-two thousand and eight to early twenty eleven. Earlier this year, consumer spending, excluding vehicles, was twenty three percent above its pre-recession peak while credit card balances remained seven percent below their pre-recession high.
In other worlds, since the financial crisis, credit card balances have expanded at rates well below historic norms even as aggregate consumer spending has grown. But that has changed recently. Credit card balances are now rising at an annual rate above five percent.
The availability of credit cards is also expanding. Despite scrutiny from regulators, credit is becoming more available to people with lower credit scores, and credit balance growth is now fastest among the lowest credit scoring borrowers.
