By Devon Kinkead

As we navigate the complexities of the economic landscape in 2024, understanding consumer credit trends is paramount for financial institutions, policymakers, and consumers alike. A recent presentation by Andrew Robbins, a Solution Consultant at Experian at the June 2024 Micronotes Gain and Retail Forum, offers a comprehensive overview of these trends and their implications. Here, we delve into the key insights from this presentation.

Economic Update

Despite a slowdown in the first quarter of 2024, the overall economic outlook remains robust, with a forecasted growth of 2% for the year. The Bureau of Economic Analysis and Experian’s Macroeconomic Scenarios Report highlight that underlying demand measures are strong, indicating resilience in the economy.

Job Market and Inflation:

• Job Creation: After a dip in April, job creation rebounded in May, maintaining a solid labor market with minimal projected increases in unemployment.
• Inflation: Although inflation remains a challenge, with the Consumer Price Index showing stubbornly high rates, there is an expectation of a rate cut by the Federal Reserve in late 2024 and several more in 2025.

Consumer Behavior:

• Savings and Spending: Consumers have depleted some of their pandemic savings but still have substantial net worth and manageable debt burdens. This suggests room for continued spending, which is crucial for economic stability.

Consumer Credit Trends

The presentation provides a detailed analysis of various aspects of consumer credit, underscoring significant trends and their implications.

Credit Card Balances and Scores:

• Balances: Credit card balances have surged by nearly 12% over the past two years, with non-mortgage balances rising by over 11%. This indicates increased consumer reliance on credit for purchases.
• Credit Scores: The average credit score remains relatively stable, but there are slight year-over-year variations.

Generation-Specific Insights:

• Gen Z: This generation has shown a notable increase in credit card spending, especially during the holiday season. Their card balances and usage patterns are becoming a significant factor in the overall credit landscape.

Account Balances and Delinquencies:

• Total Balances: There has been a steady increase in total account balances, despite the number of accounts remaining constant. This suggests higher spending or borrowing per account.
• Delinquencies: Delinquencies have risen slightly, with balances 30+ days past due increasing by 70 basis points over two years.

Hard Inquiries:

• Trends: Hard inquiries for credit have decreased overall compared to the previous five years, particularly in mortgage and bankcard sectors. However, there has been an uptick in personal loan and auto loan inquiries in 2024 compared to the previous year.

Prescreen vs. ITA Campaigns

The presentation also touches on marketing strategies, specifically the use of prescreening versus Invitation to Apply (ITA) campaigns in direct mail marketing. There has been a strategic shift towards ITA campaigns due to their cost-effectiveness and alignment with current economic conditions and budgetary constraints.

Direct Mail Volume:

• Trends: Although there was a slight decrease in overall direct mail volume in recent months, Prescreen mail volumes remain at about 400MM per month while ITAs hover around 150MM per month.

Conclusion

The insights from Experian’s presentation provide a valuable snapshot of the current state of consumer credit in the United States. Despite economic challenges, consumers continue to spend, albeit with increasing reliance on credit. Financial institutions must navigate these trends carefully, balancing growth opportunities with the risks associated with higher consumer debt levels. Understanding these dynamics is crucial for making informed decisions in today’s complex financial landscape.