Consumer debt is slowing

February 7, 2024

Consumer credit rose at a seasonally-adjusted annual rate of 0.4% in December, a sharp slowdown from the 5.7% of November. That marks the slowest increase in consumer credit since August's decline. Consumer credit outstanding is now $5.01 trillion, an all-time high. Households have proven they can withstand higher debt burdens with low delinquency rates and continued healthy consumption. On a year-over-year basis, consumer credit outstanding has grown 2.4%, the slowest pace since April 2021.

Both revolving and nonrevolving debt slowed in December. Revolving debt, which is dominated by credit cards, rose less than 1% by $1 billion in December, the slowest pace since June. Interest rates on credit cards rose once again in the fourth quarter, but not as much as 2022. The average credit card interest rate for all accounts now stands at 21.5%, up from 20.1% in the first quarter of 2023.

Nonrevolving debt, such as car loans, rose by 0.2%. Credit outstanding on motor vehicle loans rose 0.4% in the fourth quarter, a slowdown from the third quarter and the slowest pace since the first quarter of 2020. Consumers continued to pay down student loans, with credit outstanding on student loans falling 0.3%. That is the third quarter in a row of declines. Student loan credit is down 2.1% year-over-year, an all-time low for the series going back to 2006. The Treasury data from the Department of Education indicated that borrowers paid in excess of 2019 levels leading up to and during the month of October when forbearance ended.

The series on consumer credit does not adjust for inflation. When controlling for prices, consumer credit outstanding has been steady since the onset of the pandemic, now just $2 billion above February 2020 levels, and off of the all-time high of December 2022 when consumers were taking on credit to combat inflation.