According to the latest data from the Federal Reserve, consumer credit credit balances experienced a surge during June. The increase of around $5 million is the first back to back monthly increase seen over the past three years.
The movement of credit card balances is tracked by the Federal reserve using their monthly G19 consumer credit report.
The most recent report, which was released last Friday, highlighted that revolving credit climbed 8 percent to $798 billion, continuing an upward trend that began in May of this year. Revolving credit is almost entirely made up of credit card debt.
The increases seen in both May and June mean that credit card issuers have posted their first consecutive balance increases since 2008, when the global recession was at its darkest.
The June increase is only the fourth increase in revolving credit in the past three years. While some experts view this as a positive thing, with the opinion that if people are spending more on their credit cards, then they must be more comfortable repaying their debts, there are others who disagree.
Many financial analysts have expressed concerns that credit card balances are rising while the economy is still unstable and unemployment remains high. This could point to consumers relying on credit cards to make ends meet. Some of theses analysts warn that another recession is an increasingly possibility.
James Rushing, vice president of global management consulting firm A.T. Kearney, believes that the increases are due to prices rising across the board. Rushing said,
You’re seeing an increase in prices. Given more availability of credit, people tend to spend more. Even as consumers cut back, they still need to spend more when they go shopping.
Others say that the rising credit card balances are a sign of difficult economic times. Dennis Moroney of advisory services firm Tower Group says that if large numbers of consumers cannot maintain their balance then there is an increased risk of delinquency which could force banks into charge offs. Moroney said,
The longer the unemployment rate remains high, I think a growing number of consumers will be doing a balancing act with their finances. Using one credit card to pay off the other, covering just the minimum payment amount.
The increase was not limited to revolving debt. Non revolving debt which also includes auto, student and home loans also increased by 8 percent. Overall, consumer debt in the United States increased for the ninth consecutive month.