Fed Claims Overall Credit Card Debt Saw Surprising Decline Last Month

Total consumer borrowing in the United States grew at a much slower rate than experts anticipated, thanks in part to a surprising dip in credit card debt, according to a report from Bloomberg News.

The figures for consumer debt last month were recently released by the Federal Reserve, and they show that, while credit increased by $8.7 billion, this gain in overall debt was much lower than many analysts initially feared.

Still, with debt continuing to rise, many American are exploring the possibility of filing for bankruptcy in order to shed their debts, particularly credit card debt.

Total Consumer Credit Rises at a Sluggish Rate

According to statistics compiled by the Federal Reserve, consumer credit is taking some unpredictable turns:

  • Total gain. As mentioned above, consumer credit rose by $8.7 billion in February. While this number may seem large, it pales in comparison to the $18.6 billion gain experienced by consumers in January.
  • Below forecasts. Sources that that the average economist predicted a rise of $12 billion in consumer credit in February, which shows that consumers were much less willing to take on new debt than experts anticipated.
  • Reason for slow credit growth. American consumers are likely trying to repay old loans, and may also be less optimistic about the country’s short-term financial future. In addition, recent news about slow job growth may have convinced many consumers to once again tighten their wallets.

While the economy did gain more than 100,000 jobs last month, this figure represents the smallest such increase in the last five months.

As a result, the unemployment rate may begin to rise again, which could spell troubling news for consumers who are already struggling to make ends meet.

Credit Card Debt Slows Down

Most of the sluggishness of consumer credit last month can be attributed to a somewhat surprising drop in Chapter 7 bankruptcy.

According to Aneta Markowska, an economist at New York’s branch of Societe Generale, “[c]redit card borrowing has slowed down a bit” as the “process of repairing consumers’ balance sheets still has farther to go.”

This drop in credit card debt was evidenced by the Federal Reserve’s report that revolving debt, which includes outstanding credit card payments, fell by more than $2 billion in February after another steep drop of $3 billion in January.

These figures suggest that consumers in the United States may be growing increasingly wary of difficult financial times ahead.

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