March Consumer Credit Rebounds

Credit card debt rebounded in March, with consumers charging $957 billion, or 7.95% more than the prior month. The rebound is due to high oil and food prices, which consumers paid for with plastic. (Source: CreditCards.com, Credit card activity climbs in March, May 7, 2008)

The Federal Reserve's most recent G-19 Consumer Credit report also stated that non-revolving debt, like mortgages and auto loans, shot up 6.8%, after a low growth rate of only 2% in February. This growth is despite continued tightening of credit terms for mortgages.

Credit card debt now totals $3,117 of credit card debt per person, or $8,104 per household. Non-revolving debt now totals $1.6 trillion, or $5,211 per person or $13,550 per household. Note: This estimate is based on 307 million people in the U.S., an average of 2.6 persons per household, and 119 million households. (Source: U.S. Census, Population Clock; Average Household Size)

The declining housing market has caused many families to switch from home equity loans to credit cards to finance purchases. In addition, the Bankruptcy Abuse Prevention Act of October 2005 has prevented many indebted families from filing for bankruptcy, further inflating the credit debt figures.

The availability of credit for personal consumption drives 70% of the U.S. economy. The tightening of credit has contributed to slower GDP growth. The rebound in March, however, may mean that the economy wil avoid a recession.

What It Means to You

A soft economy coupled with rising credit card debt is a good time to reduce your financial vulnerability. Consult with your financial planner and develop ways to reduce your own credit card debt....and avoid becoming a statistic in the Federal Reserve’s G-19 report next month.

Related Articles

• Chicago Federal Reserve web site How to Budget
• Making a Plan to Reduce Credit Card Debt
• More Resources for Reducing Credit Card Debt