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The increase in credit card balances that occurred during the third quarter of 2019 is deeply rooted in the steady rise of consumer credit that has occurred over the past several years. This increase was driven by lower interest rates, improved credit standards, continued growth in consumer spending, and an increase in borrowing for consumer purchases.
Lower interest rates have made credit more accessible and attractive for consumers, while improved credit standards have opened up access to credit for those with less than stellar credit histories. This combination has helped to drive an increase in spending and borrowing power, driving increased demand for credit cards.
At the same time, continuing economic growth and consumer confidence have further signalled an increase in consumer spending that has further driven the increase in credit card balances. With consumer spending increasing, more people are using credit cards to make purchases. As cardholders increase their spending, it increases their total credit card balance.
Finally, the deregulation of the financial services sector in the U.S. has allowed credit card companies to offer more enticing rewards programs and more competitive interest rates, which has helped to drive an increase in credit card usage.
All of these factors have combined to create the record $1.08 trillion in credit card debt that we witnessed during the third quarter of 2019, and it appears that the trend will continue as consumers remain confident and credit remains plentiful.