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Americans Cut Their Credit Card Debt
Posted on | May 8, 2015 | 5 Comments
Outstanding consumer debt (which is American’s total debt that does not include mortgages) grew in February. The debt increased from $15.52 billion to $3.34 trillion overall according to the Federal Reserve. However, the gain was attributed to an increase in auto loans and education loans instead of increasing credit card debt. In fact, credit card debt had the largest decline in February since April of 2011.
Although debt increased significantly, credit card debt (revolving debt) fell about 4.97% in February, and it has been declining at about that rate for the prior four months. Student loan debt and auto loans, on the other hand, grew 9.44%, which is the largest monthly increase in two years. This data seems to reflect that consumers are making efforts to rein in their spending (outside of car loans).
This controlled spending also likely means that they are trying to rebuild credit and increase their overall financial outlook. For those starting a small business or looking for ways to accept payments at their small business, a suppressed credit score could be a serious problem. If this describes you, look into getting a high risk merchant account at eMerchantBroker.com.
Increase in Household Spending, But a Decrease on Consumer Spending
Although overall credit card debt decreased, consumer spending actually increased 0.1% in February. Although this doesn’t sound like much, consumer spending was declining in both December and January, which unusual for that time of year, so this is a welcome change. However, spending on goods and services actually declined slightly. That makes the numbers a little confusing, but when you consider that Americans are putting more money into their cars instead of goods and services, then numbers start to make a little more sense.
The decrease in spending on goods and services may signify that consumers are still worried about spending too much and are focused on saving. On the other hand, it could also be that the unseasonably cold weather has caused households to reduce shopping trips and put their money into paying for heating bills, for example. Consumer spending drives economic growth, so this decrease is a little troublesome. On a brighter note, the auto industry has definitely benefited from increased sales of trucks and SUVs because consumers want vehicles that will deal better with the colder weather. Of course, those types of vehicles generally cost more than an average car, so the auto loans are also much higher.