Though borrowers were once again successful in cutting their credit card borrowing in September, their continual use of nonrevolving credit led to an increase in outstanding balances.
The total amount owed on all non-mortgage credit accounts rose 5 percent to nearly $2.74 trillion in the month of September despite a middling decrease in total outstanding credit card balances, according to the latest monthly statistics issued by the Federal Reserve Board. This increase was driven entirely by a 9.2 percent increase in borrowing on non-mortgage installment loans, made up mostly of education and auto financing.
This type of borrowing – referred to as nonrevolving credit – rose to nearly $1.89 trillion in September, up from August’s $1.87 trillion, yet another all-time high, the report said. And as usual, the majority of that increase came in the form of student loans granted by the federal government to cover borrowers’ education expenses.
Through the end of September, borrowers owed $509.5 billion on these balances, up from $495.7 billion in August, and also a record high, the report said. Student loan borrowing has surged in the last few years, in September 2010, consumers only owed $272.6 billion on these debts.
On the other hand, credit card debt once again returned to the declines seen in most of the last few months after ticking up slightly in August, the report said. In all, this type of debt slipped 4.1 percent in September, and balances dropped to $852 billion from August’s $854.9 billion, the report said. This was more or less in line with the levels seen for most of the year, as apart from a somewhat significant jump in May, credit card debt has hovered in the neighborhood of $850 billion.
Meanwhile, interest rates paid on credit card balances were more of a mixed bag, the report said. Where all accounts were concerned, the average rate declined to 11.95 percent in August, down from the 12.06 percent seen at the end of the second quarter. But on accounts assessed interest charges, the average rate surged, to 13.22 percent from 12.76 percent.
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Consumers may want to be more careful of credit card borrowing in the coming months, when balances typically rise quickly as a result of the holiday shopping season.
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