The last round of stimulus checks started going out in March, and people continued to receive them in waves, and used them to drive retail sales to fabulous records in March and April. But in May, the magic was starting to fade. And May is when consumers dipped into their credit cards again.
Credit card debt and other revolving credit, such as personal lines of credit, ticked up by $9 billion, or by 1.0% in May from April, seasonally adjusted, according to the Federal Reserve this afternoon. As measly as this uptick was, it was the first major increase since February 2020, and the largest percentage increase since December 2019. This followed many months during which consumers had paid down their credit cards.
The balance rose to $975 billion (seasonally adjusted), still down by nearly 11% from the peak in December 2019, and down by 2.3% from a year ago. Can you see that little relief-uptick that the financial media made such a big deal out of?
This 1% month-to-month uptick triggered phenomenal excitement in the media about renewed borrowing by consumers, and not just any old borrowing but the most expensive form of borrowing for consumers, and the most profitable for banks, at usurious interest rates often over 20%, and sometimes over 30%, charged by the same banks that pay near-0% on savings accounts.
This uptick caused a lot of relief, especially at the Federal Reserve, because no one wants consumers to pay down their high-interest-rate credit cards, and consumers had threatened to do just that. Read more…