Still Charging: The Growth of Credit Card Debt between 1992 and 1995

Between the end of the last recession in the first quarter of 1991 and the second quarter of 1997, consumer revolving credit outstanding, which includes consumer credit card debt, more than doubled—from $247 billion to $514 billion. The rapid rise of consumer debt, especially credit card debt, generated much discussion about its cause, sustainability, and implication despite the fact that credit card debt is a small part of a household’s total indebtedness.1 The discussion often referred to aggregate data, such as consumer revolving credit outstanding, but such data fail to provide details that are necessary for a clear understanding of the factors that contributed to the growth of consumer credit card debt. I therefore undertook a simple study using household data to examine the components that contributed to the growth of total credit card debt. The analysis, Yoo (1997), showed that increases in average balances accounted for most of the growth of credit card debt. It also indicated that lower-income households—those in the bottom half of the income distribution— increased their credit card ownership rate and average credit card balances faster than the population, but upper-income households were responsible for most of the rise in total credit card debt. Unfortunately, the data used in the study—the Survey of Consumer Finances conducted in 1983, 1989, and 1992—did not cover most of the period since the end of the last recession. The recent release of the 1995 survey provides an opportunity to update the analysis by using the new data to separate the growth of credit card debt between 1992 and 1995 into its two main components: an increase in the number of households with credit cards and an increase in the average balances on credit cards. As before, the analysis also separates the effects of lowerand upperincome households on the growth of credit card debt over that period. Finally, I compare the growth of credit card debt between 1992 and 1995 to its growth during the other intersurvey years. Such comparisons may identify characteristics that have affected the recent growth of credit card debt that were not previously significant.