Consumer borrowing in the United States increased $19.3 billion to $2.5 trillion in December, the Federal Reserve said today, according to Bloomberg News.
This brings borrowing almost back to prerecession levels and is 4.4 percent higher than in September 2010, when borrowing hit a postrecession low, the Associated Press reported.
Borrowing to pay for cars and college drove the increase, as outstanding non-revolving credit rose $16.55 billion in December, Reuters reported. Revolving credit, which includes credit-card use, grew for the fourth month in a row, increasing to $2.76 billion, according to Reuters. The Federal Reserve's borrowing report does not include mortgages, home equity loans and other loans tied to real estate, according to the AP.
Consumers “are willing to take on this debt because there is some increasing degree of confidence in the economy,” Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, told Bloomberg News. “Consumers over the past several years have done a pretty good job of repairing their balance sheets.”
Another explanation for the higher borrowing is that wages haven’t kept pace with inflation and consumers are putting the difference on plastic, the AP reported.
According to MarketWatch:
Credit-card debt declined from a peak of $972.2 billion in September 2008 to $790.2 billion last April. Since then, the trend has flattened out and picked up to $801.0 billion in December.
If consumers had continued paying off their cards at the same rate, credit-card debt would be about $100 billion lower today, which would mean consumers would be spending less per month on interest payments, JB Orecchia, CEO of SavvyMoney.com, told MarketWatch. “That money going to interest payments is a tax on the economy, it could be going into the economy,” Orrecchia said.
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