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Credit Card Use, Other Borrowing Spiked in March

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The amount being carried on consumers’ credit cards has generally been falling for more than a year, but that trend may have been reversed in March, as balances increased sharply, as did borrowing on other types of credit.

Consumer credit card balances rose 7.8 percent in March, the first time they’ve risen since the new year, to a total of $803.6 billion, according to the latest monthly consumer credit statistics issued by the Federal Reserve Board. That’s up from the $798.5 billion seen at the end of February, but still down slightly from the $803.8 billion seen at the end of last year, when consumers increased borrowing to fund their holiday gift purchases.

In addition, the amount consumers paid for carrying a balance from one month to the next increased significantly from the end of 2011, the report said. In all, APRs on credit card accounts that were assessed interest rose to an average of 13.04 percent from 12.78 percent. However, the average interest rate on all accounts slipped somewhat to 12.34 percent from 12.36 percent at the end of last year.

Meanwhile, the amount of borrowing on nonrevolving credit—that is, consumer installment loans not including mortgages, and largely driven by student lending and auto financing—increased even more significantly, rising 11.3 percent on an annual basis in March to a total of nearly $1.74 trillion, up from slightly more than $1.72 trillion. This was driven largely by federal student loans, which rose by about $6.9 billion in March.

Overall, consumer borrowing of all types increased to more than $2.54 trillion, up from the previous month’s $2.52 trillion, and up 10.2 percent from the same time last year, the report said. That was the largest spike in consumer borrowing in terms of both percentage and dollar amount seen since the final months of 2001.

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Since the end of the recession, consumers had been far more conscientious in avoiding credit card debt, prompting balances to fall considerably in the last year. Many experts noted this was the result of many cash conscious consumers becoming “transactors”—borrowers who pay off their bills in full at the end of every month—instead of “revolvers,” who tend to carry a balance. However, some had also predicted that by broadening lending standards again, many card issuers might see increases in balances.

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