The Federal Reserve released its monthly report on the state of consumer finances yesterday. Among the notable points: Total credit card debt outstanding is now at the lowest level since 2004:
Source: Federal Reserve.
What's interesting about this is that most consumers, by and large, aren't paying credit card balances off. Instead, banks are writing off bad debt faster than consumers can accumulate new debt. As I wrote in January: "Credit card debt nationwide fell by $34 billion during the first two quarters of 2010. Yet banks wrote off $42.5 billion in bad credit card debt during the same period." Those who still have open credit card accounts are wracking up new debt. The old stuff is just being defaulted on like there's no tomorrow.
More interestingly, banks have mostly stanched the bleeding in their credit card divisions. Most of the big card issuers showed a profit in their credit card divisions last year, with the exception of Bank of America
|
Bank |
Credit Card Division Profit, 2010 |
|---|---|
| Bank of America | ($6.6 billion) |
|
Citigroup |
$1.5 billion** |
|
JPMorgan Chase |
$2.1 billion |
|
America Express |
$4 billion* |
Sources: Company filings, Capital IQ, a division of Standard & Poor's.
*Full company. **Pre-tax.
So there's the weirdness of the credit card market: Consumers are ridding themselves of credit card debt, but not by paying it off; banks are making the sacrifices for them. But most of those same banks are still profitable -- quite so. I guess that's the business of lending money at 30% interest rates.
