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2010 Credit Card Debt Study

CardHub-2010-Credit-Card-Debt-StudyWhile outstanding credit card debt decreased nearly $67 billion in 2010, consumer performance actually worsened relative to 2009.  Charge-offs provide the context necessary to make sense of that apparent contradiction.  Banks were required to write more than $75 billion in old credit card debt off their books this year, and such balances cannot be ignored given that consumers remain on the hook for it.  The statute of limitations for credit card debt ranges anywhere from 3 to 15 years, depending on which state one lives in, and collection efforts do not stop when an outstanding amount gets removed from an issuer’s balance sheet.  As such, we actually finished the year with roughly $8.1 billion more credit card debt than we started it with.

It would be natural to ascribe our recidivist overleveraging to the economy’s lethargic recovery from the Great Recession, but how then can we explain the fact that consumers were able to pay off $11.6 billion in credit card debt during 2009?  The difference, it seems, lies with our growing economic optimism.  Many consumers assume that we are now out of the woods and their spending habits can therefore return to pre-recession levels.  Unfortunately, without the housing bubble to inflate income, such habits are no longer sustainable.  Coming to terms with this new norm will therefore be necessary if we want to avoid manifesting a double-dip credit crunch.

Below you can find detailed information about how credit card debt levels changed on a quarterly basis throughout 2010 in order to better understand consumer spending and payment habits.

Year-End Results

By the Numbers:

  • Net Result in Debt Load: + $8,111,428,150
  • Outstanding Credit Card Debt: - $66,934,000,000
  • Credit Card Charge-Offs: $75,045,428,150

Commentary:

One might look at the $66.9 billion decline in credit card debt and come to the conclusion that consumers paid down their balances in a big way. The reality is, however, that entire decrease is the direct result of Americans defaulting on their debt.  In fact, the true picture is that Americans accumulated $8.1 billion additional credit card debt in 2010 relative to 2009. Like in 2009, the only quarter in 2010 that Americans actually paid down their debt was the first quarter of the year. Finally, unlike 2009, Americans ended 2010 with a net increase instead of a net decrease.

Q1 Main Findings

By the Numbers:

  • Net Result in Debt Load: - $43,064,532,000
    • Relative to Q1 2009: - 9%
  • Outstanding Credit Card Debt: - $63,700,000,000
  • Credit Card Charge-Offs: $20,635,468,000

Commentary:

Consumers paid down their credit card debt in a big way. Consumers actually paid down around $43 billion of credit card debt. This pay down is 9% less than what consumers paid down a year ago.

Q2 Main Findings

By the Numbers:

  • Net Result in Debt Load: + $9,795,349,900
    • Relative to Q2 2009: + 149%
  • Outstanding Credit Card Debt: - $12,152,000,000
  • Credit Card Charge-Offs: $21,947,349,900

Commentary:

Consumers accumulated almost $9.8 billion more credit card debt in Q2 than Q1 2010, given that the drop in outstandings is smaller than the dollar amount that was charged-off. This is 149 percent more debt accumulation than was accumulated in this quarter last year.

Q3 Main Findings

By the Numbers:

  • Net Result in Debt Load: + $6,595,779,750
    • Relative to Q3 2009: - 38%
  • Outstanding Credit Card Debt: - $10,290,000,000
  • Credit Card Charge-Offs: $16,885,779,750

Commentary:

Consumers accumulated almost $6.6 billion more credit card debt in Q3 than Q2 2010, given that the drop in outstandings is smaller than the dollar amount that was charged-off. This is 62 percent less debt accumulation than was accumulated in this quarter last year.

Q4 Main Findings

By the Numbers:

  • Net Result in Debt Load: + $34,784,830,500
    • Relative to Q4 2009: + 54%
  • Outstanding Credit Card Debt: + $19,208,000,000
  • Credit Card Charge-Offs: $15,576,830,500

Commentary:

In Q4 of 2010, outstanding credit card debt went up by $34.8 billion, when the $15.6 billion write-off is considered. This is 54 percent more debt accumulation than was accumulated in this quarter last year.

Data & Graphs

Consumer Credit Card Debt and Charge-off Data (in Billions):

Outstanding Revolving Consumer Debt Outstanding Credit Card Debt Quarterly Credit Card Charge-Off Rate Quarterly Credit Card Charge-Off in Dollars
2010 $825.7 $809.2 $75.0
Q4 2010 $825.7 $809.2 7.70% $15.6
Q3 2010 $806.1 $790 8.55% $16.9
Q2 2010 $816.6 $800.3 10.97% $21.9
Q1 2010 $829 $812.4 10.16% $20.6
2009 $894.0 $876.1 $83.2
Q4 2009 $894.0 $876.1 10.12% $22.2
Q3 2009 $893.5 $875.6 10.1% $22.1
Q2 2009 $905.2 $887.1 9.77% $21.6
Q1 2009 $923.3 $904.8 7.62% $17.2
Q4 2008 $989.1 $969.3

(Source: CardHub.com, Federal Reserve)

Other Years’ Studies

 * Some of the numbers may differ from study to study as a result of the Federal Reserve updating certain numbers for several months after first publishing them. For questions or more information regarding this study, please contact our media department.

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