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Consumer Credit Growth Slows, Revolving Debt Rises ​-‌ December 2023

Overall consumer credit growth slowed in October, but the headline number masks a trend: households are shifting toward revolving credit ‌as they manage⁤ day-to-day liquidity and holiday spending. Total consumer credit rose at a seasonally adjusted annual rate of 2.2%⁣ in⁢ October, down slightly from 2.6% in September, according to Fed data⁣ released Friday⁤ (Dec. 5).

Yet beneath that headline, revolving credit accelerated while nonrevolving credit cooled.

Revolving Credit Drives Borrowing Growth

Revolving balances reached $1.3 trillion in‍ October and expanded‍ at a 4.9% annual rate, up from 4% in September. Revolving credit includes credit cards, ⁢but is not limited to‌ them. It reflects short-term ⁢borrowing behavior tied to household cash flow, discretionary spending and liquidity needs. By contrast, nonrevolving debt slowed to a 1.2%‌ annual​ rate in October, a⁤ drop from⁤ September’s ⁢2.1% pace.

Nonrevolving debt largely ⁣captures​ auto⁢ loans and longer-term ​installment products. The gap ⁣between the​ two categories suggests that households are thinking carefully‌ about ⁢long-term financed ‍purchases while relying‌ more heavily on credit ​card access heading into⁢ the holiday season.

Households Continue Borrowing At Higher Interest‍ Rates

Interest rates remain elevated according to the Fed file. Depository institutions remain primary contributors to credit expansion,‍ while finance company activity has ‍softened, especially across ​installment products. The latest reading ⁢on interest rates charged to cards stood at more than 21.3%,​ up from 14.7% roughly