American consumers charged at a record pace through the first nine months of this year but there is every indication now things may be slowing. There is no evidence to suggest cardholders have hit the brakes . . . just a downshifting from fourth to third gear.
Consumer debt accumulation slowed in September and moderated in October according to the latest Federal Reserve data. VISA U.S.A.'s SpendTrak retail sales monitor reveals holiday dollar volume, between Thanksgiving Friday and December 9, is up 19% compared to 25% last year.
The gear shifting in credit card volume may be related to two other unsettling statistics namely, card delinquencies and bankruptcy. Credit card delinquencies or the amount of dollars more than thirty days past due are up sharply for the past four months. Three delinquency tracking services: American Bankers Association, Moody's Investor Services and RAM Research's Bankcard Barometer all confirm this trend. Consumer bankruptcy filings, which often lags other indicators, are also reportedly edging u p.
First look for a contraction in the number of low rate offers. This will present itself in several ways: issuers will approve fewer cardholders applying for the card issuer's best rates; introductory or so-called "teaser rates" will edge up from an average of 9% to 10%; and competitive solicitations to marginal credit risk consumers will drop like a rock.
Secondly, the cranking up of credit lines will cease with some issuers beginning to crank down credit lines for delinquent cardholders or over-extended cardholders.
Thirdly, the recent trend of adding punitive interest rates, reducing late payment grace periods and jacking up of late fees and over-limit fees will pick up steam in 1996.
