After a 10.5% increase in May, credit card use dropped 5.1% in June, according to the Federal Reserve's G-19 Consumer Credit report. Loans for education, automobiles and other "non-revolving" credit rose a steady 7.5%. The lower gas prices we experienced two months ago might have helped consumers trim back their dependence on credit cards.
Despite May's uptick in credit card spending, families returned to relying on cash for personal consumption expenditures. Credit card debt was pared back a bit, to $864.6 billion, down significantly from the record of $1 trillion set in 2008. This still translates to $7,266 owed to credit cards per household. (Note: This estimate is based on 119 million households or 308.7 million / 2.59 persons per household. Source: U.S. Census, 2010 Data; Average Household Size)
Record-low interest rates are motivating people to refinance homes, take out school loans and buy cars. As a result, the "non-revolving" debt rose to a record $1.713 trillion, or $14,395 per household. In total, Americans now owe $2.577 trillion, the largest amount since August 2008. This translates to a whopping $21,600 per household. (Source: Federal Reserve, G.19 Release, August 7, 2012)
What It Means to You
Record-low interest rates won't last. In fact, the yield on the benchmark 10-year Treasury note, recently at 200 year lows, is rising. As the economy returns to health, interest rates will rise further. If your debt is higher than the national averages quoted above, don't add to it. But, if you can safely refinance, then don't delay.
How to Reduce Credit Card Debt
- A Life Preserver in a Sea of Debt
- Making a Plan to Reduce Credit Card Debt from the About.com Guide to Credit, LaToya Irby
- More Resources for Reducing Credit Card Debt from the About.com Guide to Beginners Investing, Joshua Kennon