Christmas in June? Bureau report looks at credit card use in holiday spending

End-of-year credit card borrowing and repayment of credit card balances in the new year is the focus of the bureau’s latest quarterly consumer credit trends report, released Friday by the federal consumer financial protection agency.

The Quarterly Consumer Credit Trends report from the Bureau of Consumer Financial Protection (BCFP, formerly known as the CFPB), according to the agency, examines how the peak in consumer borrowing evolves around the annual holiday shopping season, in November and December.

The report, the bureau said, explores how consumer debt balances rise during that period and how long balances take to return to pre-holiday levels. For example, the report notes, retail sales in December are more than $50 billion higher than they are in any other month. Spending is particularly pronounced, the report states, for some categories of durable goods, such as jewelry and household appliances, that can represent unusually large purchases for many households.

The report notes that other research (by the J.P. Morgan Chase Institute) indicates that “within-year” volatility in expenditures is typically greater than within-year volatility in income. “In other words, the holiday shopping season may be a time when consumers have especially high expenses, but not especially high income. Purchases on credit may help make some of these seasonal expenditures possible,” the report states.

Highlights of the study, the bureau said, include:

  • General purpose credit card debt and retail store card debt exhibit end-of-year peaks with monthly aggregate balances steadily rising before the end of the calendar year and then falling gradually through March.
  • Consumer credit card borrowing experiences differ across consumers with different credit scores and different credit card utilization rates. The seasonal rise and fall in balances is greatest among consumers with superprime credit scores and consumers with lower utilization rates. In contrast, balances for consumers with subprime credit scores exhibit relatively little seasonality, and there is evidence this is related to their relatively high utilization rates.
  • Seasonal delinquency patterns may indicate financial distress among some credit card borrowers at the end of the year.

The bureau said its report also studies patterns in consumer delinquencies during this period, “in order to help understand some of the financial strain that consumers may experience during or after this time of higher than average expenditure.” The report also, the agency said, examines how these experiences differ across consumers with different credit scores and different levels of credit card utilization.

Quarterly consumer credit trends: End-of-year credit card borrowing