Credit card use dropped 5.9% in December, according to the Federal Reserve's G-19 Consumer Credit Report. This followed November's .8% drop. Instead, shoppers relied more on cash, debit cards and layaway than credit cards to fuel holiday gifts. In addition, families continued to take out loans, as non-revolving debt rose a record 11.4%, following a 9.7% increase in November.
Despite the drop, Americans owed a hefty $849.8 billion in credit card debt, or $7,140 per household. They also owe $1.928 trillion in school, auto and furniture loans, or $16,200 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)
On average, American households owe $23,346 in consumer debt (remember, this doesn't include mortgages). This is more than $2.78 trillion, even more than before the recession. However, the composition is low-interest non-revolving debt instead of expensive credit card debt. This is a healthier base for economic growth. It's also proof that the Fed's quantitative easing is working to boost the economy. (Source: Federal Reserve, G.19 Release, February 2013)
What It Means to You
Credit is becoming more available, especially for auto, furniture and school loans. If you need a loan, and you can get a low fixed rate of interest, take it. It won't be available this time next year.
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