The Federal Reserve July and August reports suggest that there has been a decline in the consumer credit card balances. It seems that the people of USA are now concerned to clear the outstanding credit card debt.
According to the July G.19 consumer credit report by Federal Reserve, the credit card debt fell 5 percent in July to $792.5 billion. In August, the credit card debt continued to decline and fell to 3.4 percent to $790.1 billion. This decreasing trend clearly indicates that Americans are using credit cards lesser than the past.
The major factor behind this decline is the rise in unemployment, which was recorded at 9.1% in September and also the consumers falling trust on the current economy. Although many policies are introduced by the government, the economy still doesn’t seem to be in a very healthy state.
Consumers, however, didn’t completely reduce on all their purchasing in July. Report by Federal Reserve also confirmed that consumer recorded an increase in other forms of borrowing such as home loan, auto loan, student loan and so on increased from 11% to $1.67 trillion. This is the largest increase since 2005. Until the time the economy remains unpredictable, consumers should concentrate on reducing their credit card debts considerably and in turn increase their personal savings.
Finance experts suggest that consumers should eliminate their credit card debts ASAP. Although credit cards are normally considered life savers, people who are un-employed or have below average income should be cautious of their credit while using their credit card. This will help consumers better manage their funds through smart credit card usage and also be able to pay off their credit card debts on time.
Not just end-users but it was also recorded that banks approved fewer applications from that in the past and also reviewed credit ratings. $183 billion of revolving debt has been wiped out since April 2011. Consumer habits as well as the slow recovery are factors behind such a trend. Consumers are now more wary while using their credit cards and there seems to be a conscious effort to keep their purchases under check as many people face huge debts and are now balancing their income and reduce credit.
Credit card balances are on the decline and more people are being aware of credit debts as reports have suggested. However, as we go through a tough economic condition, people have started making wiser financial decisions.