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Data for today’s episode is provided by Mercator Advisory Group’s Report: Credit Card Risk, Protracted Pandemic, and the Household Budget: Advice for Issuers
The Data Around U.S. Credit Card Line Utilization:
- U.S. credit card lines, the amount that issuers underwrite for each open account, are at a historic high.
- In the latest numbers published by the Federal Reserve, total credit lines amount to $3.9 trillion.
- However, only 27% of these credit lines are in use, and $3 trillion is available in open credit.
- Open credit lines are at a peak, with almost $4 trillion in issuer credit commitment to cardholders.
- Note that line utilization is on the downswing, based on a 20.3% utilization rate.
- In contrast, the utilization rate in 2009 was 27.7% after credit card issuers began to contract credit lines during the Great Recession.
Mercator Advisory Group released a report covering the credit card issuer risks in a world of COVID variants, titled Credit Card Risk, Protracted Pandemic, and the Household Budget: Advice for Issuers. The research explains current credit card risk and the impact on household budgets as inflation grows, interest rates increase, and the workplace continues to be disrupted.
The research explains why the latest COVID variation may affect consumers and their spending habits differently than it did in 2020.
“The economic relief programs offered by the U.S. and many other countries might be impossible if the pandemic rebounds,” comments Brian Riley, Director, Credit Advisory, at Mercator Advisory Group, and the author of the research note. Riley continues: “Credit card issuers must keep a keen eye on the impact of inflation, rising interest rates, and employment. Issuers underwrite with higher spreads than ever, but the interest opportunity may not be sufficient if credit losses shift.”