U.S. revolving credit, 98% of which is credit card debt, fell to $874 billion in November from a revised total of $887.7 billion in October, the largest dollar-value drop since records began in 1968, according to a Federal Reserve G.19 report on consumer credit released Friday.
The decline marks a record 14th consecutive month that saw Americans shed credit card debt. Since September 2008, consumers have eliminated nearly $101.2 billion in card debt. Several industry analysts agree that cardholders have changed their habits because of the lingering recession and fears about when it will end.
“Consumers are working hard to get their financial houses in order by spending less, saving more and paying down debt,” said James Chessen, chief economist with the American Bankers Association, in a prepared statement. “There’s still a bumpy road ahead with many people unemployed and family budgets stretched to their limits.”
Unemployment figures released Friday that show last month’s jobless rate at 10% support Chessen’s thinking. Bottom line: with lingering fears about job loss, consumers remain worried about paying their bills, let alone spending cash on shopping excursions or other extras.
Total seasonally adjusted consumer credit outstanding, which includes revolving and nonrevolving credit, decreased at an annual rate of 8.5% in November, to $2.46 trillion, the report states. Fitch Ratings reports that, while the economy is on a slow path to recovery, unemployment and credit card charge-off rates likely will hit new highs this year. Fitch forecasts unemployment to hit 10.5% by mid-year and card charge-offs on outstanding balances to reach 12%, (CollectionsCreditRisk.com, Jan. 6).