Consumers shed $4.2 billion in credit card debt in January, erasing the previous month’s uptick that likely was caused by relatively robust holiday credit card spending, according to data the Federal Reserve Board released March 7.
Consumer revolving credit, 98% of which is credit card debt, in January totaled $795.5 billion, down 0.5% from a revised total of $799.7 billion for December, according to the Fed’s monthly G.19 report.
Credit card borrowing generally has declined for more than two years as consumers have paid down debt and have taken out fewer new credit card loans, analysts say. Consumer revolving credit in January sank to a level not seen since September 2004 when it was $793.9 billion. Consumer credit card borrowing peaked on the eve of the recession in August 2008 at $973.6 billion, according to Fed data.
“It’s not surprising to see that December’s gain in credit card spending didn’t last because it was probably just due to seasonal holiday spending,” Scott Strumello, an associate with Auriemma Consulting Group, tells PaymentsSource. “Consumers continue to be very cautious about spending, and there is no sign elsewhere in the economy of a big recovery.”
Some analysts warn that the decline in credit card borrowing has not yet hit bottom, but Moody’s Investors Service last month predicted that credit card outstanding receivables likely will begin to grow during the second half of this year (
Strumello is more circumspect. “Credit card borrowing took a hit during the recession, and it is hard to see exactly when we will begin to see steady growth again in credit card spending,” he says.
Overall consumer credit, which includes auto loans, student loans and other consumer loans, rose 0.2% in January to $2.412 trillion from 2.407 trillion in December.
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