As with most things in 2020, consumer credit’s trajectory of growth was upended by the COVID-19-induced economic recession. Revolving credit, of which credit card debt is a major component, shrank by 11.2% over the year, while nonrevolving credit increased 3.9%, thus producing an overall growth rate of 0.0%.
In December, consumer credit increased at a seasonally adjusted annual rate of 2.8% from the previous month, with revolving debt1 decreasing by 3.6% and nonrevolving debt2 increasing by 4.8%. Consumer credit totaled $4.2 trillion on a seasonally adjusted annual basis, with $976 billion comprised of revolving debt and $3.2 trillion in nonrevolving debt. This is an increase of $9.7 billion from the previous month, with revolving credit decreasing by $3 billion and non-revolving credit increasing by $13 billion.
The contraction in revolving credit in 2020 could be attributed to consumers scaling down purchases to be repaid in the short-term. Meanwhile, consumers remain optimistic about long-term economic recovery, as closed-ended (nonrevolving) expanded, albeit at a slightly more stunted pace than before.
With each quarterly release of the G.19 report, the Federal Reserve also publishes data on student loan and motor vehicle loan debt. In Q4 2020, on a non-seasonally adjusted basis, outstanding student loan debt increased from the previous quarter by $2.5 billion to $1,707 billion and outstanding auto loan debt increased by $9 billion to $1,228 billion. Together, student and auto loans make up over 90% of nonrevolving credit, with the former category’s negative causal effect on homeownership, particularly of younger prospective homeowners, having been well documented.
- Revolving credit plans are largely composed of credit card debt but also include home equity lines of credit (HELOCs). These may be unsecured or secured by collateral and allow a consumer to borrow up to a prearranged limit and repay the debt in one or more installments. The G.19 Consumer Credit report excludes HELOCS and home equity loans, as they are secured by real estate.
- Nonrevolving credit is closed-end credit extended to consumers that is repaid on a prearranged repayment schedule and may be secured or unsecured.