Managing Debt

Consumers Took On More Debt in November

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The amount of money owed by borrowers to lenders on both installment loans and credit cards surged once again in November, after less substantial increases in the previous two months.

Total balances on revolving and nonrevolving credit rose 7 percent in November to a total of slightly less than $2.77 billion, thanks in large part to a surge in education loans obtained through the federal government, according to the latest monthly statistics from the Federal Reserve Board. Meanwhile, consumers borrowed only slightly more on their credit cards, which may be somewhat surprising given that November is certainly part of the holiday shopping season, when balances generally rise significantly.

In all, credit card debts ticked up just 1.1 percent in November, to a total of just $858.4 billion, the report said. That followed a 4.8 percent increase in October. On the other hand, the current level is also the highest seen since May, when it totaled $858.8 billion, but has been below $860 billion since October 2010.

And at the same time, the amount of interest people with these accounts could expect to pay slumped, the report said. Interest rates for all accounts slipped to an average of 11.88 percent in November, down from the 11.95 percent seen at the end of the third quarter. Similarly, rates for accounts actually assessed interest charges fell to 12.81 percent from 13.21 percent.

Meanwhile, though, nonrevolving debt – installment loans not including mortgages – surged by 9.6 percent, the report said. In all, consumers owe just more than $1.91 trillion on these outstanding balances, which haven’t fallen from one month to the next since July, and obligations are now well above level seen during and following the recent recession.

However, much of that change was led mostly by significant increases in student loan balances once again, the report said. Federal student loan obligations surged $4.9 billion to a total of $521.3 billion in November, and are now up morethan $100 billion from the same month last year.

Rising debt balances may be both a gift and a curse for consumers. On the one hand, they may show that borrowers are generally feeling better about their financial standings, but also put them in a more precarious position going forward.

Image: .v1ctor., via Flickr

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