U.S. consumers were wary again in July of using their credit cards, but didn increasing their debt load for car and school, according to a Federal Reserve report.
Total borrowing rose by $10.4 billion in July, to a record high of $2.85 trillion, a pace just slower than June’s $11.9 billion increase.
Most of that growth is due to the $12.3 billion jump in non-revolving debt – including auto loan and student loan deb – t to a total of $2 trillion, a new all-time high. In June, non-revolving credit rose by $15.6 billion. Borrowing for those two types was up 8.1 percent from the year before.
After falling $3.7 billion in June, however, revolving credit –which includes credit card borrowing – continued its decline with a drop of $1.8 billion in July to $850 billion. Credit card debt is now down 17 percent from its July 2008 high and has made little movement since last year.
The Federal Reserve survey does not include mortgage debt.
Since the financial crash, consumers have rearranged their spending priorities. Credit card use for many has been limited to nothing but essential purchases. Americans seem to view other debt as less risky, like student and car loans. A slow economy has enticed millions to go back to school for more employment possibilities and low interest rates make car loan feel very affordable.
Spending accounts for a large chunk of the U.S. economy though, and without increased credit card spending, GDP could be limited over the next few quarters. The financial climate remains tense for many American families right now as unemployment, although falling, remains high at 7.3 percent and incomes are barely matching the pace of inflation. When consumers start seeing more job creation and wage increases they will be more likely to start spending again.
About Amber NelsonAmber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.
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