Americans' credit card debt in the first quarter rose 9% to $841 billion, over the same period last year, even as the balance dipped relative to 2021's fourth quarter, according to the New York Federal Reserve Bank's latest quarterly report on U.S. household debt and credit. 

The nearly 2% drop in the first-quarter, relative to the fourth quarter, was what the Fed called "a typical seasonal change." That's because of the big spending that usually takes place during the yearend holiday shopping spree.

By contrast, the first-quarter rise over the year-ago period is more noteworthy because economists have been on the look-out for signs that consumers' credit card debt is creeping back up after it plunged following the start of the COVID-19 pandemic in early 2020. Total credit card balances are "$71 billion higher than Q1 2021 and represent a substantial year-over-year increase," the Fed said in a May 10 press release accompanying the report this week.

On the flip side, the balance remains substantially below the $890 billion in credit card debt consumers were carrying in the first quarter of 2020, just as the deadly pandemic struck the U.S. It's also below the all-time quarterly high of nearly $930 billion in the fourth quarter of 2019.

Another New York Federal Reserve report, also released this week, provided input on consumer sentiment, with the central bank finding that most Americans believe it's harder to obtain credit than a year earlier. It was the fourth consecutive month showing that result. With interest rates on the rise, expectations of future credit availability also deteriorated among the survey’s respondents, that April 2022 Survey of Consumer Expectations report said.

"Expectations for future credit availability also deteriorated, with the difference between the fraction of respondents expecting it will be easier to obtain credit in the year ahead and the fraction of respondents expecting it will be harder to obtain credit in the year ahead falling to a series low," said the May 9 press release for the report.

Meanwhile, a report from the Federal Reserve System last week showed signs that credit card spending is picking up. The G.19 Consumer Credit showed overall outstanding consumer credit rose 9.7%, on a seasonally adjusted and annual rate basis, during the first quarter. 

Generally, rising payment volumes, coupled with skyrocketing inflation, is pushing up credit card balances, said Scott Hoyt, a senior director at Moody’s Analytics. “If you look at the Federal Reserve's revolving credit series, it suggests the credit card debt is growing pretty rapidly after seasonal adjustments,” Hoyt said in an interview.

Both Visa and Mastercard reported double-digit percentage gains in revenue and net income during the first three months of the year, relative to the period in 2021, as they benefited from increased consumer spending, among other factors.

Ted Rossman, a senior industry analyst with Bankrate.com and Credit Cards.com, was perplexed by the decline in credit card debt for the first quarter, relative to the Fed's fourth-quarter figures.“I still find it puzzling because the banks during their recent earnings calls all reported really robust credit card spending," he said. "I thought all signals were that this would be another big increase.”

He concluded: “Consumers seem to be in good shape.” The Fed's survey of consumers reflected that, too. Consumers' fear of losing their jobs decreased and their expectation of a rise in household income rose as their concerns about inflation in the next year eased, though that was not the case for three years out.

By Jonathan Berr on May 12, 2022
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