Credit Cards

Credit Card Use Rebounded in December

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Americans are continuing to finance more of what they buy with credit as the economy strengthens, according to a recent report from the Federal Reserve. Outstanding consumer credit — which includes debt on credit cards and car loans, for example — grew at an annual rate of about 6%, the same as last year.

U.S. consumers held about $3.1 trillion in outstanding revolving and nonrevolving credit at the end of 2013, up from $2.9 trillion in 2012. While the last few months of the year involved a fair amount of ups and downs, in part because of the government shutdown in October, consumers balanced their credit card use to finish out December.

“I think we kind of jumped over a few potential potholes and kind of kept rolling,” said Samuel Rines, an economist and equity analyst with Chilton Capital Management in Houston. “The first part of this year will be interesting as we continue tapering the [quantitative] easing from the Fed and really begin to absorb these higher interest rates.”

The seasonally adjusted annual growth rate for revolving credit (a credit line that can be re-used, such as a credit card) in October jumped to 5.6% after it had been -1.3% in September, and it barely budged in November at a revised 0.7%. December, the biggest month of the year for credit card use, posted an annual growth rate of 7% for revolving credit, bringing 2013 to a close at 1.9%, up from 0.4% in 2012. Economists call this sort of adjustment “consumption smoothing,” which indicates people kept their spending and standards of living in check amid economic shifts.

The annual growth rate for nonrevolving credit (installment loans) declined slightly to 8% in 2013 from 8.7% in 2012, but products like student loans and auto loans didn’t experience the same fluctuations as credit cards.

“The interesting thing about the government shutdown is it doesn’t appear to have had much of an effect at all on nonrevolving credit,” Rines said. “If people were going to buy a car, they bought a car.”

At the end of the year, outstanding auto loans accounted for $873 billion of American consumer debt, up from $808.5 billion in 2012. Student loan debt surpassed $1.2 trillion, up from 2012’s $1.1 trillion.

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