Revolving Credit Took a Big Jump in April, New Federal Reserve Data Show

Judging from new Federal Reserve data, April was a month of joy for merchants and credit card issuers as consumers spent more on their credit cards, but for consumer advocates and financial advisors it may have been a month of angst as they saw foolish consumers take on too much debt.

The Fed’s latest consumer-credit report, released Friday, shows that revolving credit grew at a seasonally adjusted annualized rate of 11.6% in April. The increase was revolving credit’s big spike by far since April 2014, when it grew 13.9%.

In excess of three-fourths of revolving credit is on credit cards, so any increases likely are a sign of more credit card transaction volume at merchant locations. For card issuers, such increases generate more interchange income and potentially more interest income if consumers revolve their balances.

The Fed’s new data generally conform to recent reports from the payment card networks that showed higher credit card usage in 2015’s first three months. Market leader Visa Inc., for example, said its U.S. credit card payments volume increased 12% year-over-year to $302 billion in its second quarter of fiscal 2015 ended March 31 on a 15% increase in transactions.

Visa’s competitors also reported U.S. volume increases in the first quarter, although not as much. American Express Co. said its card-billed business, most of which is on its credit and charge cards, grew 6% to $169.2 billion. MasterCard’s U.S. credit purchase volume also grew 6% to $146 billion. Sales volume on Discover cards increased 3% to $26.4 billion.

Preliminary Fed data estimate total revolving credit outstandings hit $899.5 billion in April, up just over 3% from $870.9 billion a year earlier. Outstandings are still down by nearly 12% from their peak of $1.02 trillion in April 2008.

In a May report about the economic well-being of U.S. households in 2014, the Fed said “many individuals are ill-prepared for a financial disruption and would struggle to cover emergency expenses.” Some 47% of respondents to a Fed survey said they either could not cover a $400 emergency expense, or would cover it by selling something or borrowing money.