Consumer credit jumps in December as card borrowing rebounds

U.S. consumer borrowing snapped back in December, a sign that households leaned more heavily on credit after pulling back the month before. For everyday investors, the detail to watch is the mix: the Federal Reserve said most of the increase came from revolving credit, the category typically tied to credit cards.

Total consumer credit rose by $40.8 billion in December, the Federal Reserve said Friday. That followed a $5.4 billion decline in the prior month, according to the Fed figures reported by MarketWatch.

Measured in percentage terms, December marked the strongest increase since June 2022, the Fed said. Consumer credit data can move from month to month, but a swing of that size gets attention because it offers a look at how households are using borrowed money.

Credit-card borrowing led the move

Revolving credit accounted for most of December’s rise, according to the Federal Reserve. Revolving credit usually refers to credit-card balances, where borrowers can repeatedly draw against a credit line and pay it down over time.

That category increased at a 20.2% annual rate in December. An annual rate shows how fast borrowing would grow over a full year if the month’s pace continued. The rebound followed a 12.1% drop in revolving credit in the prior month, the Fed said.

The sharp month-to-month reversal matters because credit-card borrowing is more sensitive to consumer behavior than some other types of credit. A rise can point to stronger spending, greater reliance on cards, or some combination of both, though the Fed data cited did not break out the reasons behind the increase.

Auto and student loan category also rose

Nonrevolving credit also increased in December, but at a slower pace than revolving credit. This category mainly includes auto loans and student loans, according to the Fed.

Nonrevolving credit rose at a 5.8% annual rate in December. That compared with a 2.7% increase in the prior month, the Fed said.

MarketWatch noted that nonrevolving credit is typically less volatile than credit-card borrowing. That makes the December report more about the surge in revolving balances than a broad, even jump across every type of consumer debt.

For investors tracking the consumer side of the economy, the report adds one more data point on household borrowing behavior at the end of the year. The confirmed takeaway from the Fed’s numbers is clear: total credit grew strongly in December, and credit-card-related borrowing did most of the work.

This story draws on original reporting from MarketWatch.