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Credit Cards, Student Loans Drive Rise in Borrowing

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The amount of money owed by consumers to lenders for all types of non-mortgage credit increased significantly in October, in keeping with surges seen in most of the last several months.

Consumer credit jumped 6.2 percent on an annual basis in October, driven by increases in both revolving and nonrevolving borrowing, according to the latest statistical release from the Federal Reserve Board. Through the end of that month, consumers owed more than $2.75 trillion, up from the slightly less than $2.74 trillion seen at the end of September.

The larger portion of that increase came as a result of another uptick in nonrevolving credit, which is defined as installment loans not including mortgages, the report said. In October, this kind of borrowing rose to nearly $1.9 trillion, up from slightly less than $1.89 trillion, and an increase of more than $10 billion. That was also up from $1.75 trillion observed in October 2010. The increases seen in most of the last several months have repeatedly set all-time records for borrowing in this category.

The majority of this increase in non-revolving debt came as a result of consumers seeking more education loans from the federal government, the report said. In October alone, this type of borrowing increased by $6.9 billion, to a total of $516.4 billion. That’s up from the $509.5 billion seen in September and a huge increase from the $402.2 billion seen in October 2011.

Meanwhile, borrowing on credit cards increased significantly as well, as borrowers added some $3.4 billion to their outstanding balances during the month, the report said. At October’s end, borrowers owed $857.6 billion on their credit cards, up 4.7 percent on an annual basis from the $848.7 billion seen in the same month last year, but also up from the $854.2 billion from September. The all-time high for this kind of borrowing, however, was nearly $1.03 trillion in July 2008 at the height of the recession.

Consumers generally tend to increase their borrowing efforts during the final few months of the year as a means of financing their holiday purchases, which means that revolving credit in particular could tick upwards in the near future. Further, this trend also tends to lead to increased instances of delinquency and default on credit cards in the new year.

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