Major Trend Continues – Credit Card Debt Decreasing
A significant trend has developed since the economy weakened during the fourth quarter of 2008: consumers continue to decrease their credit card balances.
According to the Federal Reserve’s G.19 monthly report released last week, the amount of revolving credit has decreased for the third consecutive quarter. In addition, the revolving credit figure has declined on an annualized basis for a record 9 straight months. Credit card debt makes up the great majority of the revolving credit category.
Revolving credit decreased at an annual rate of 8.2% during the second quarter of 2009. This follows annualized declines of 8.9% during the first quarter of the year and 6.5% in the fourth quarter of 2008.
The total amount of revolving credit at the end of June was $917.0 billion, down $5.3 billion from the May number and $10.1 billion from April’s figures.
A number of factors seem to be affecting this decrease:
* Consumers are concerned about their finances. Industry leaders attribute the decrease in the amounts that consumers are charging can be linked to the significant APR increases on their credit cards.
* Issuers are cutting back on the credit limits extended to many customers. To minimize risk, credit card companies are slashing limits and restricting the amount of money customers can charge on that card.
* Issuers are also closing accounts. A number of issuers have terminated accounts that have seen little or no activity for a prolonged period of time.
The Federal Reserve’s latest G.19 report can be found at: http://www.federalreserve.gov/releases/g19/Current/