The CFPB has issued a report focusing on end-of-year credit card borrowing and repayment of credit card balances in the following year.  The report is based on data from the Bureau’s Consumer Credit Panel, a nationally-representative sample of approximately five million de-identified credit records maintained by one of the three nationwide credit reporting companies.

The report explores how credit card borrowing evolves during and after the annual November/December peak in consumer spending, how quickly these balances are repaid in subsequent months, and how the year-end period of borrowing may correlate with financial distress.

The report’s key findings include:

  • The year-end rise in consumer debt is most pronounced in general purpose credit card debt and retail store card debt.  General purpose credit card balances rise nearly 4 percent from their October baseline as compared with retail store card balances which rise 8 percent increase from their October baseline.  In contrast, auto loans and home equity credit lines do not exhibit similar seasonality.  The CFPB observes that to the extent the consumers who take on new credit card debt during the holiday season are the same consumers who repay that debt shortly thereafter in the following year, it is an indication that, on average, consumers may use year-end credit card borrowing as relatively short-term financing.
  • The seasonality in borrowing on general purpose credit cards is most pronounced for consumers with prime and superprime credit scores. In contrast, general purpose credit card balances for consumers with subprime credit scores exhibit relatively little seasonality.  The CFPB observes that this difference is at least partially attributable to higher card utilization rates of consumers with subprime credit scores.
  • Delinquency rates on credit cards rise during and after the holiday season, with the seasonality in delinquencies apparently driven by consumers with subprime credit scores.  These patterns may indicate financial distress among some credit card borrowers at the end of the year.  The CFPB observes that the decline in delinquencies that begins in February and accelerates in March may be attributable to consumers’ receipt of tax refunds and the use of such refunds to pay down debt.