Unemployment has been improving, second quarter GDP growth estimates have been revised up, and consumer confidence recently hit a seven-year high, so we already knew that the recovery was finally starting to reach Main Street. But it’s startling how quickly that has translated into rising credit card debt.

credit card debt net results

“While U.S. consumers paid down roughly $32.5 billion in outstanding credit card debt during the first quarter of 2014, we erased nearly all of that with the largest Q2 debt build-up witnessed since the Great Recession,” writes Odysseas Papadimitriou for CardHub, projecting that US consumers will pick add $54.79 billion in credit card debt in 2014.

CardHub

cardhub avg household credit card debt 0914

Consumer credit card debt jumps two quarters too soon

US credit card debt has a strong seasonal pattern. People spend more during the fourth quarter and then pay it back in the first quarter, essentially borrowing from their January paychecks to make it through the holiday season. This pattern is evident even when the debt level has an overall direction, such as the deleveraging in 2009 – 2010. At first glance, you might not notice anything odd about the CardHub’s chart because average household credit card debt has been range-bound since 4Q10.

Credit card charge-off

The surprise is that the level of debt is near the top end of that range two quarters too early, implying that we are seeing secular growth of credit card debt on top of the normal seasonal cycle. For reference, the increase in debt is 66% larger in 2Q14 than it was in 2Q13 and 58% larger than in 2Q12. The credit card default rate also increased slightly quarter on quarter, from 3.32% in 1Q14 to 3.45% in 2Q14, although that is an increase from near historic lows.

Consumers also paid off less credit card debt in 1Q14

This isn’t the first sign that consumers were taking on more credit card debt, either. In the first quarter of this year total credit card debt declined as usual, but consumers paid off 1% less than in 1Q13 and 5% less than in 1Q12. That’s a small enough difference that it could have just been noise, though the combination of low credit card payments and low retail spending during a difficult winter is telling. But now that we have another quarter that has diverged even more from the last few years’ flat debt levels, it’s hard to wave away the change in behavior.