Alamy Have consumers forgotten what it was like during the depths of the Great Recession? Not according to the latest data from Equifax (EFX).
The company reports that credit balances rose year over year in the 12 months ending in July. It is the first such increase in five years.
The Results Are Mixed
American banks hold $536.5 billion in credit card debt as of this writing. That’s up marginally from $533.3 billion a year ago at this time, Equifax reports. And yet, interestingly, credit card revenue wasn’t up across the board last year. American Express (AXP) saw a 1.6 percent increase in U.S. card revenue, while JPMorgan Chase (JPM) suffered a 4.5 percent decline in credit card proceeds in 2012.
But the story doesn’t end there. Despite the rise in credit card balances, consumers have made improvements in managing other types of debt.
This is definitely a story of silver linings peeking out from under the gray news. Here’s a closer look at the four key areas Equifax tracks in its annual National Consumer Credit Trends Report.
1. Credit card balances are rising again, but delinquencies are not. Blame new credit applications for rising balances. According to Equifax, consumers applied for and received $72.9 billion in new credit from January to May — a 6 percent increase over the same period last year. New loans and new credit now sit at a five-year high. The good news? Delinquencies fell to just 1.86 percent in July — an 11 percent decrease year over year.
2. Fewer young adults will enter the workforce financially crippled, but … : Student loan applications fell 9.3 percent from January to May. The bad news? Balances grew 4 percent to $24.3 billion. Those who carry student debt are shouldering more of a load than their graduating peers, leading to record write-offs. Regulators had already forgiven $11.6 billion in student debt through May, an eight-year-high and 58 percent more than than last year at this time.
3. We’re ready to go on a spending bender. Good news for Ford Motor (F) and other car makers. Dealers and banks have teamed up to boost auto financing from $745.3 billion at this time last year to $826.8 billion as of Equifax’s report, a 10.9 percent increase.
4. We’re also ready to buckle down on our biggest debt — real estate. Home loan write-offs fell more than 22 percent and now stand at their lowest level since 2007. Severe delinquencies (i.e., 30 or more days past due) fell 22 percent while primary mortgages 90 days past due or in foreclosure fell 25 percent to a five-year low. Home equity installment debt fell 4.1 percent while revolving equity debt fell 8.9 percent. Count them all as signs of a sustained recovery in the housing market.
“Only two major consumer credit segments are currently growing: auto financing and student loans,” said Equifax Chief Economist Amy Crews Cutts in a press release. “In all other segments, consumers are reducing their debt burdens, either negatively, through foreclosures and bankruptcies, or positively, through payoffs — payoffs are dominating in most cases today. We expect mortgage balances to begin rising again over the next several months as new home purchase loans overtake foreclosures and payoffs.”
Trading burdensome credit card debt for tax-deductible mortgage debt? Talk about a long-overdue step up.
So while there’s still a ways to go — $536 billion in credit card debt isn’t to be taken lightly — efforts to pay off existing balances and avoid late payments and other fees suggest many of us are making progress.
Where do you stand? Have you paid off debt in the last year? Tell us your story in the comments box below.
Motley Fool contributor Tim Beyers had no position in any stocks mentioned at the time of publication. Find him on Twitter @milehighfool. The Motley Fool recommends American Express and Ford. The Motley Fool owns shares of Ford and JPMorgan Chase.