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Discover: Consumers Using More Credit

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One of the nation’s largest lenders and payment processors recently reported that the rate at which consumers swiped their credit cards to make purchases increased during the second fiscal quarter of this year.

Between March and May, Discover Financial Services saw sales volume on its credit cards rise 5 percent to a total of $26.1 billion, which reflected a larger amount of card use on consumers’ part, according to a report from the Associated Press. In those three months, the number of transactions processed rose at the same 5 percent rate. And during that same period, the total amount carried as balances by consumers rose 4 percent to roughly $46.6 billion.

“We feel as though there is, let’s just say, improved confidence more broadly, as exhibited by their willingness to pull their cards out of their wallet,” Dicscover chief financial officer Mark Graf said.

Additional statistics from the lender indicate that perhaps that growing confidence among consumers is well-founded, as Discover once again saw charge offs and early delinquencies decline once again, this time reaching all-time historic lows, the report said. However, the company also expects that it will see the rate at which it has to write off seriously delinquent accounts as being uncollectable increase over the next 12 months, due largely to broadening credit standards that grant more subprime borrowers access to new lines of credit.

Further, many experts have projected in recent months that the continued weak growth in the job market may contribute to consumers losing some of their newfound confidence in their ability to spend on their credit cards, the report said. Consequently, this may also lead to an increase in defaulted accounts as some consumers struggle to find employment and lose the ability to pay their outstanding credit card bills.

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On the other hand, experts have been predicting for awhile that charge offs would “bottom out” in the near future, as broadening credit standards and slow hiring have been ongoing for several months. Nonetheless, consumers continue to increase spending as well as on-time payments. Improving credit conditions have been experienced by all major credit card lenders across the country for some time now.

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