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Consumer Credit Surged Once Again in December

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The holiday season and improving economy convened to create a significant increase in the amount being borrowed by Americans across a number of different loan types during the month of December.

Overall, the amount being borrowed by consumers jumped 9.3 percent in December 2011, which is notable because that came after November’s month-over-month increase of 9.9 percent, according to the latest monthly statistics from the Federal Reserve Board. Those two increases are in contrast with the significantly smaller rise seen in October of just 3.3 percent.

However, the reason for the increases in December is different from those in November. In December, the 9.3 surge in borrowing was driven largely by the 11.8 percent increase in nonrevolving debt—that is, installment loans such as those to finance education or auto purchases, but not including home loans. The previous month, this type of borrowing had increased significantly—by 10.7 percent—but December’s surge drove nationwide debts on these loans to nearly $1.7 trillion.

Meanwhile, consumers’ revolving credit use—made up almost entirely of credit card debt—rose as well, the report said. December saw balances outstanding rise 4.1 percent, less than half of the 8.4 percent jump observed in November. However, the most recent increased borrowing, almost certainly driven by the holiday shopping season, pushed outstanding balances to a total of $801 billion nationwide at the end of December. This marked the first time credit card debt was above $800 billion since the same month in 2010.

In all, consumers now owe close to $2.5 trillion on their various debts, though that number would be significantly higher if mortgages were included in the total, the report said.

The steadily improving economy has seen a number of factors—including falling unemployment—come together in recent months to create a better atmosphere for consumers to once again begin borrowing. Many were forced to stop doing so during the recession because of financial conditions that made paying their debts difficult to afford, and millions fell so far behind that they defaulted.

Another major reason that consumers may be borrowing again is that those who would have been willing to do so before—but were unable to because of lenders’ still-tight borrowing restrictions—have in recent months gained more access to credit as card issuers increase offers to subprime borrowers.

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