Credit card debt is down more than 18% from its 2008 high. The U.S. unemployment rate is stuck near double-digits, as the economy remains fragile. So how is it that American Express has reported record customer spending in the fourth quarter and for the full year? Although some consumers are struggling and curbing their credit card debt, there are a couple potential explanations for Amex's record spending during the quarter and year.
Explaining Record Customer Spending
In the Amex earnings press release, Kenneth I. Chenault, chairman and chief executive officer says:
"With cardmember spending up 15 percent this period, we reached all-time records for the quarter and the full year."
Retail Sales Soaring Everywhere
At first glance, this might seem surprising. But perhaps it shouldn't be. We already know that U.S. retail sales hit a new all-time high in December. Annual retail sales, however, did not. So this can't tell the whole story.
More Card Usage?
Another likely explanation is that Americans are using credit cards for more convenience purchases than they used to. Then, even in the face of declining credit card balances, credit card usage could actually be up. For example, if spending happened to be constant over two periods, card spending would rise if card usage increased. It's also worth noting that the lion's share of Amex's business comes from customers who don't run a balance -- so they aren't necessarily curbing their spending.