Financial Update (Fourth Quarter 2009)

Consumer Credit Fell by $12 Billion in August

photo of hand holding credit cardConsumer credit outstanding among U.S. consumers took a significant dip in August, declining by $11.98 billion, according to Federal Reserve data released in early October. The decline was the seventh consecutive month that U.S. consumers cut their debt and represents an annual reduction in total outstanding consumer credit of 5.8 percent. The drop followed July’s decline of 9.1 percent.

Two types of credit see reductions
Revolving and nonrevolving credit dropped, according to the report. Nonrevolving credit, which includes loans for larger items such as vehicles, school loans, and vacations, fell by $2.07 billion, or at a 1.6 percent annual rate. This decline is much smaller than the one seen in July, which was 12.6 percent annualized.

Revolving credit, largely made up of credit cards, fell by $9.91 billion, or a 13.1 percent annual rate. Unlike nonrevolving credit, outstanding revolving credit fell by a greater amount in August than it did in July, which saw a 3.1 percent decline.

Consumer credit report data

Total consumer credit also shrinks
Taken together, outstanding U.S. consumer credit totaled $2.46 trillion in August, an amount that has been declining since the third quarter of 2008, the Fed data show. Of that total, $899 billion was made up of revolving credit, and $1.563 trillion was nonrevolving. The data do not include mortgages or other debt related to real estate.

October 28, 2009