Research Shows Seasonal Patterns in Credit Card Borrowing and Repayment

The patterns fluctuate among different groups of consumers depending on their credit score and other factors, according to the BCFP.

6/12/2018 2:00 PM

Research Shows Seasonal Patterns in Credit Card Borrowing and Repayment

Credit card and retail store card debt peaked at the end of 2017, when consumer spending and retail sales also tend to increase, according to new research from the Bureau of Consumer Financial Protection.

The BCFP’s quarterly consumer credit trends report also shows monthly aggregate balances steadily increased before Dec. 31 and then declined gradually through March. According to the bureau and the U.S. Census Monthly Retail Trade Report, retail sales in December are more than $50 billion higher than any other month of the year.

“Consumer credit card borrowing experiences differ across consumers with different credit scores and different credit card utilization rates,” bureau researchers Leonel Drukker and Scott Nelson write in a blog post.

They also explore credit card borrowing patterns and delinquencies after the peak spending months of November and December, otherwise known as the “holiday shopping season” and how it may connect with financial distress for consumers.

“General purpose credit card balances rise nearly 4 percent above their October baseline in an average year by January, and these balances then return to their October baseline by March. Meanwhile, retail store card balances grow more than 8 percent above their October baseline, and these balances take longer to return to their preholiday levels,” according to the report on end-of-year credit card borrowing.

Additional key findings in the report include:

  • “The seasonal rise and fall in balances is greatest among consumers with super prime credit scores and consumers with lower utilization rates,” according to Drukker and Nelson. “In contrast, balances for consumers with subprime credit scores exhibit relatively little seasonality, and there is evidence this is related to their relatively high utilization rates.”
  • “Seasonal delinquency patterns may indicate financial distress among some credit card borrowers at the end of the year,” they report.

Seasonal delinquency also appears to be driven by consumers with subprime credit scores.

Drukker and Nelson note that delinquencies for credit-card-holding consumers (meaning they are 30 or more days past due on at least one recently reported account) increase slightly by about 0.2 percentage points from October to January and then decline “markedly” in February and March.

“These patterns may indicate financial distress among some credit card borrowers at the end of the year, perhaps as seasonal financial pressures make it more difficult to repay credit card debt,” according to the report.

Data used for the research are from the Bureau’s Consumer Credit Panel including approximately 5 million anonymous credit card records from one of the three nationwide credit reporting bureaus. Researchers pooled data from 2014-2017.

Read the complete report on End-of-Year Credit Card Borrowing from the BCFP.

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