Credit Card Usage Continues to Decline

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According to the Federal Reserve, consumer borrowing rose to $2.456 trillion in January. But what's surprising is that this increase occurred despite another drop in credit card loans.

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Consumer borrowing increased in January for the first time in a year, the Federal Reserve reported Friday. The increase alone was significant, but the news was even more surprising since it occurred despite another drop in credit card loans.

According to the Federal Reserve, total consumer borrowing rose to $2.456 trillion in January, an annual rate of 2.5%. The increase came from non-revolving credit like auto, personal and student loans that rose at a 5% annual rate. Revolving credit, which is primarily credit card usage, fell for the 16th consecutive month, decreasing at an annual rate of 2.3%.

Recent studies underscore some clear trends either taking place or projected for credit card usage.

“We know that over the past 18 months, banks cut credit limits for 58 million cardholders.” says Bill Hardekopf, CEO of and author of The Credit Card Guidebook. “If issuers keep this up and cut 45% of the spending power on credit cards, they will be forcing consumers to continue to reduce their usage of credit cards and find alternative forms of payment like debit cards and cash. That might not be a bad thing for the financial well being of the American consumer.”

Stacy Johnson

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