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MacroMonitor Market Trends June 2012

MacroMonitor Market Trends is a newsletter from Consumer Financial Decisions (CFD) that highlights topical news and trends of interest to you and your colleagues. If you would like more information about the topic in the newsletter or would like to discuss other ways that we can assist you in your research or marketing efforts, please contact us.

A Decline in the Number of Credit-Card Revolvers

The first decade of the twenty-first century has many defining characteristics: volatile financial markets, terrorism, declining property values, rising fuel costs, and economic instability, to name a few. Given this short list, it is not surprising that consumers were starting to tighten their belts financially even as the "irrational exuberance" of the 1990s was reaching its peak and well before the events of 2008 precipitated the worst economic crisis since the Great Depression. One of the more telling signs of this broad trend toward saving more and spending less is the steady, if uneven, decline in the proportion of US households that either choose or find themselves unable to pay off their credit-card bill(s) each month—the Revolvers.

Figure 1: Trend of Households that Revolve Credit-Card Balances

In 2000, the incidence of Revolvers was 54%; it fell to a low of 43% in 2008. As it did in 2004, the proportion of Revolver households started to increase somewhat in 2010 as the economic tensions subsided and consumers regained some clarity and confidence about their financial situations. The 2010 incidence (45%) means that nearly 8.3 million households have exited or avoided the ranks of the Revolvers in the past decade.

For clues about the future, the 2010–11 MacroMonitor data reveal that whereas 23% of Revolvers indicate that they owe more on their credit-card balances than they did a year earlier, 53% say they owe less, and 22% say they owe about the same amount. Does this reporting mean the ranks of the Revolvers will resume their decline? Given the gradual healing of the economy, it is anybody's guess how many households that currently pay off their credit-card balances each month will stray (or slip) into the ranks of the Revolvers. Thus, we anxiously await the arrival of the 2012–13 MacroMonitor data in a few months to answer this and many other questions about how consumers of financial services are changing.

To learn more about credit-card Revolvers, please contact CFD.