Managing Debt

Loan, Credit Card Balances Grew in August

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In the past year or more, consumer borrowing has been on the rise despite Americans’ efforts to curb their credit card use. However, even those accounts carried more debt at the end of August.

Consumer credit – that is, the total amount of debt owed to lenders on both credit cards and installment loans not including mortgages – rose 8 percent in August after declining 1.1 percent on an annual basis in July, according to the latest monthly statistical release from the Federal Reserve Board. Now, consumers owe nearly $2.73 trillion on all these accounts, up from July’s slightly less than $2.71 trillion.

The majority of this increase came in the form of borrowers taking on far more debt for auto loans and education financing, the report said. In all, borrowing on what the Fed refers to as non-revolving credit ticked up 9 percent after just a 1.5 percent jump in July. As a result, outstanding balances on this type of financing rose to more than $1.87 trillion from less than $1.86 trillion. Much of that came on student loans issued by the federal government, which rose to $495.7 billion from $471.8 billion.

Meanwhile, consumers also significantly increased their credit card borrowing on a year-over-year basis after two months of declines, the report said. Credit card debt spiked 5.9 percent in August after falling 4.6 and 6.7 percent in June and July, respectively. Now, borrowers owe $854.9 million on these accounts, up from July’s $850.7 million, but still slightly lower than the $855.5 million seen at the end of June.

Despite the increase in credit card borrowing, the current levels are nonetheless still the lowest seen since the end of 2005, the report said. Unfortunately for consumers, the same cannot be said for either overall consumer credit or non-revolving loan balances. Apart from minor month-to-month declines, both overall and non-revolving balances have been steadily climbing for most of the time since the end of the recession, even as credit card debt has fallen appreciably.

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Consumers may have simply been more conscientious about making sure they cut their credit card balances in the wake of the recession and worked to keep them as low as possible. Many experts note, however, that at some point there has to be a logical bottoming out to consumers’ credit card balances.

Image: shawnzrossi, via Flickr

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