The amount of new consumer debt is increasing more slowly than in previous months, growing only $5.2 billion in February, says Bloomberg. It sounds like a lot of money, but it’s a much slower rate of growth than the $10.3 billion increase in consumer credit seen in January.
How long will consumers keep reaching for their credit cards? Are they finally slowing down?
U.S. banks and other financing companies reduced lending after the collapse of the subprime mortgage market. At the same time, consumers are scaling back spending, and those who’ve exhausted home-equity loans have few alternatives other than credit cards.
“Consumers were still reaching for the plastic credit cards in February, but for how long is a big question mark,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi in New York. “The credit-market turmoil is going to eventually take its toll as banks are already cutting back on their extensions of consumer credit.”
Are you cutting back on your credit card spending? Are you falling behind?
According to a survey by the American Bankers Association released April 3, consumers fell behind on credit-card, home- equity and auto loans at the fastest pace in 15 years during the fourth quarter of last year. Banks and other lenders, in turn, increased their reserves against losses.
U.S. Consumer Borrowing Rose $5.2 Billion in February (Update1) [Bloomberg]