In the time since the end of the recession, millions returned to using their credit cards more often than during the downturn, but that trend may soon start to slow due to a number of economic factors having a negative impact on consumer confidence.
New data from the Conference Board shows that consumer confidence declined in May, due largely to economic factors that are hurting Americans' ability to grow their incomes, according to a report from Fitch Ratings. In particular, wages have remained stagnant over the last few months, and though the unemployment rate has been improving, it is still elevated above historical levels and not getting back on track especially quickly.
For these reasons, it's expected that consumer credit card use could start to slow in the coming months, even as more borrowers are now being extended offers for new accounts, the report said. Thanks to loosening lending standards, many Americans who may not have had access to lines of credit in the time since the end of the recession may now be given access to these accounts, and could help to buoy spending somewhat even as more creditworthy borrowers curtail it.
The Federal Reserve Board's latest statistics show that consumers actually increased the amount they borrowed and carried over from one month to the next in March, the most recent month for which statistics were available, the report said. This was largely the result of increased retail sales - which would likely decline as confidence does the same - and higher costs for gasoline, which are seen as a necessity.
But the positive that would come out of this change in consumer credit card spending habits is that more would likely make positive efforts to keep up to date on their monthly bills, the report said. Already, instances of delinquency and default on retailer-issued cards has declined to the lowest levels observed in several years, and that trend would likely continue for the near future.
Since the end of the recession, consumers have been far more conscientious about properly managing their credit card debt, such as making greater efforts not to carry over a balance from one month to the next, and keep spending under control.
