According to the Wall Street Journal (Oct. 29 and 30): “Credit card debt has recently reached a new milestone: it’s back to where it was before the pandemic. “? No – There is still plenty of unused gas in the tank.
The following graph what happened.
Prior to 2020, quarterly credit card loans grew at a steady rate of more than 5% year-over-year, as shown across the dotted green line. and expansion resumed. It should be noted that a return to the year-end point of 2019 still leaves lending well below the previous trend line.
First of all, credit card loans are notable balances. While the existing trillion dollars would possibly seem high, the total amount of unused appropriations is much higher. Average use in the five years before Covid-19 18%).
Second, the figures are adjusted for inflation. This radically modifies the message of the WSJ article and any research on the rate of expansion. As the chart below shows, the most recent inflation-adjusted loan balance is comparable to the amount at the beginning of 2016: more than six years ago.
Two thoughts on the above observations:
First, loan balances do not show higher expenses than customers based on abnormally higher credit card debt.
Second, the many months of inflation above 2% mean that any dollar research would have to use genuine (inflation-adjusted) amounts. Failure to do so may lead to misleading conclusions, as noted above.