American Consumers Cut Credit Card Spending
May 8th, 2013 @ 11:54 AM by Amber Nelson
Americans scaled back on their credit card purchases in March, while overall consumer credit use rose much less than expected, according to the latest report from the Federal Reserve.
Total consumer credit increased by just $7.97 billion in March to a total of $2.81 trillion, the smallest monthly gain in eight months. Most economists had predicted that consumer credit would grow by at least twice that amount.
Revolving credit, which mostly accounts for credit card use, fell 2.4 percent in March, the first decline this year, droppping by $1.71 billion. In February, revolving credit rose $453 million. Economists now say that credit card spending only makes up 30 percent of all consumer credit, its lowest share in over two decades.
The data suggests that U.S. consumers are still wary of taking on larger balances as January tax increases reduced their paychecks and their incomes continued to stagnate. According to the Commerce Department, personal incomes fluttered up only 0.2 percent in March.
The small increase in overall consumer spending was fueled by growth in student loans and auto loan borrowing. The federal government loaned an additional $3.9 billion in student loans in March, bringing the total up to $560.8 billion. Meanwhile new car and truck sales rose to an annual rate of 15.3 million in the first quarter, according to data from Ward’s Automotive Group.
Many analysts are not concerned with the poor showing of consumer credit March, believing it to be a small speed bump in the overall trend of increasing credit. Spending has been consistently increasing for the past several months, adding to the greater economy. Future growth will be dependent on improvements in the unemployment rate and higher consumer confidence in the country’s financial environment.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.