The latest Federal Reserve reports show that while consumers now have greater access to credit cards, they are continuing to reduce the amount of debt that they owe.
In both the monthly ‘G 19’ consumer report and the quarterly senior loan officer’s survey, the results showed that American consumers continued to demand credit and there has been a great deal of improvement from the rock bottom levels seen in the darkest times during the recession. However, even as the demand for credit grows, consumers are focusing on paying off their debts.
The latest G 19 report revealed that revolving credit – which is almost entirely credit card debt – has decrease one percent in September to $789.6 billion. The G 19 report looks are consumer credit balances, but also examines non-revolving debts such as student loans, auto loans and other types of personal loan. Non-revolving debt actually rose in September to 5.8 percent to $1.66 trillion. In terms of overall debt, there was a 3.6 percent increase, taking combined revolving and non-revolving debt to $2.45 trillion.
The senior loan officer’s survey is a quarterly study which polls American banks with regard to lending practices. The latest report revealed that a small number of banks have relaxed their standards for credit card approval and that credit limits and interested rates have turned in the consumers’ favor. In response, consumers have increased their demand for credit cards.
In the years since the beginning of the recession, credit card debt has steadily been decreasing. Revolving credit peaked at $972.2 billion in September 2009, by April 2011 this had been reduced by $183 billion. This is because during the worst of the recession consumers were uneasy about having this level of credit card debt and card issuers were hesitant to lend. Stephen Brobeck, executive director of the Consumer Federation of America said,
The continued reduction of credit card debt probably reflects several factors that include not only consumer determination to pay down expensive debt, but also continued bank write-offs of uncollectible debts and greater vigilance in preventing individuals from running up huge credit card debts.
Consumer advocacy groups suggest that consumers are using the current opportunities to obtain new credit to their advantage.
Consumers pulled in by paying off credit and hopefully improved their scores during the past few years, so they may be taking advantage of a period of greater access an maybe even lower rates to get new credit cards. As long as they are not going to start carrying large balances again, this looks like a strategic move,
says Linda Sherry of Consumer Action.