Credit card debt: use declining but consumer borrowing increases

On behalf of Ellett Law Offices , P.C. posted in 1. Credit Card Debt on Thursday, June 28, 2012
Consumer borrowing may have seen a slight increase in April in Arizona and nationwide, but fewer individuals are attempting to shoulder debt on their credit cards. Reports suggest that this decline in credit card use — and subsequent credit card debt accumulation — may be in response to employers seeming to have pulled back their hiring this spring. With a lower likelihood of employment, households appear to be limiting their spending to adjust their finances accordingly.
According to Federal Reserve data, April saw an increase in consumer borrowing of $6.5 billion — half of the increase that was reported for March. Employers added only 77,000 jobs in April and only 66,000 jobs in May, the fewest in a year. Compared to the 252,000 jobs created between December and February it seems like a drastic slowdown.
It appears that credit card use has changed in accordance to the changes in job creation and consumer borrowing. At the beginning of the year, when jobs were more readily available, consumers were freer with use of their credit cards. Now that job creation has slowed down once again, credit card use is slowing down as well.
While a decline in credit card use seems beneficial in reducing debt — particularly credit card debt — the increase in consumer borrowing may be something of concern. Economists point out that consumers are spending more and saving less, leading to a need to take out loans to cover car and home expenses which could rapidly lead to debt accumulation. The way that more consumers are borrowing suggests as well that there is a certain level of comfort in debt accumulation in all areas, including in credit card usage. While some households may be able to operate by temporarily taking on small debts, not all are able to recover so quickly. For these Arizona households, debt relief options such as bankruptcy may come into play as a means of finally conquering nagging debt and forging a path to begin anew financially.
Source: Fox News, “US consumer cut back on credit card use in April,” June 13, 2012
Tags: consumer borrowing, credit card debt, debt