Credit Card Use Falls

Credit card use fell for the 23rd straight month

Credit card use fell for the 23^rd straight month, following the ongoing trend of less consumer borrowing among Americans, and adding more pressure to the already weak economy.

The Federal Reserve said on Wednesday that annual borrowing rate in July was $3.6 billion, the 17^th fall in credit during the last 18 months. Meanwhile, auto loans in July were up but was largely offset in the same category by the decline in credit card use.

The latest fall in total borrowing figures was slightly better than expected and followed a $1.02 billion drop in June, which was revised from a preliminary estimate that credit fell by $1.3 billion that month.

Economists said that credit is going to be limited by the issues confronting households including stricter lending rules by banks coping with huge loan losses.

“On the demand side, households continue to show signs of caution as they face high unemployment, minimal wage increases and poor housing conditions,” said Gregory Dacco, senior U.S. economist at his Global Insight. “On the supply side, tight lending remains the norm.”

The 1.8 percent drop in July follows a 0.5 percent drop in June.

Consumer borrowing in the same category as auto loans gained 0.6 percent in July after increasing 3.2 percent in June and 1.2 percent in May. The growing trend in the last three months signifies recovering auto sales after auto companies suffered dismal sales during the recession.

Analysts expect that American households will continue to borrow less and save more unless there are signs of improving incomes and easing of unemployment woes.

Posted by James Fried on Friday September 10 2010, 10:48 AM EST. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0