Credit Card Use Jumped in December
Feb 8th, 2012 @ 1:46 PM by Amber Nelson
U.S. consumers pulled out their plastic in greater numbers for purchases in December, according to information from the Federal Reserve Tuesday. Total credit debt increased substantially as well.
Revolving credit, such as credit card debt, grew by $2.76 billion in December to $800.98 billion, after rising $5.58 billion in November. Non-revolving credit, driven by student loans and auto loans, posted a $16.55 billion increase, to $1.697 trillion, also following a major jump in November. Total consumer credit debt rose by $19.31 billion in December, a striking increase compared with a prediction from economists surveyed by the Dow Jones Newswires that it would only rise by $7.5 billion.
Some economists, such as Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, believe the growth in consumer credit debt is a sign of recovery. Consumers “are willing to take on this debt because there is some increasing degree of confidence in the economy,” he said in a Bloomberg article.
Yet as income increases have not kept pace with spending for most of the 2011, others say the rise in November and December credit debt is more likely a sign that financially-stretched consumers used their credit cards to pay for holiday festivities and gifts.
Incomes did actually increase in December, but many people actually put away much of that increases as the savings rate rose at the fastest rate in four months.
Sustained growth in consumer credit will not be likely until the job market stabilizes. Employers did add a significant number of workers (243,000) to their payrolls in January, but a Labor Department report found that for every job opening there were on average four unemployed Americans competing for the position, a figure that is helping to keep wages down. Until the supply and demand for work is equalized, consumer spending and credit will likely be dampened.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.