But record-high revolving debt isn’t all bad news, said Ted Rossman, senior industry analyst for Bankrate. “Some of this reflects rising consumer spending, which is good for the economy, of course, and also things like population growth and increased card usage (rather than cash).”
“We had a sharp and quick decline in credit card balances because of the stimulus, because of the pandemic, because people spent less, and they paid off debt,” Rossman said. “And now we’re seeing an equally sharp run back up — much faster than something like the financial crisis [when] it took five years to find the bottom and five more to climb back up.”
“This one’s been in fast-forward,” he said.
The monthly Fed credit report doesn’t provide detailed breakouts of how the credit is being used or whether outstanding balances are paid off before interest starts to accrue, so the record consumer credit levels might not be as negative as they seem, Rossman said.
“Some of this just reflects more card usage, more e-commerce, more digital payments, people using cash less,” he said. “In some respects, higher credit card balances can reflect the growing economy. You just don’t want it to grow so much that people are falling behind [and] carrying expensive debt.”