Outstanding amount on customer credit card decline significantly in July
After a spree of uninhibited spending over the last few months, the outstanding balance on customer credit cards saw a steep fall in the month of July this year. As per Federal Reserve’s most recent report, customers paid off up to $3 million of their credit card debt.
The G.19 consumer credit report that is collated by the Federal Reserve on a regular basis clearly reveals the debt the US consumers hold. According to the reports that were released Thursday last week, the Federal Reserve revealed that the overall revolving debt fell to $792.5 billion, down by 5 percent compared to the increased spending preceding the month of June.
However, it is not just the credit card balances that saw a decline in July. Consumer confidence and unemployment are the two other aspects that saw an impact during this time period. A senior economist and vice president of American Bankers Association, Keith Leggett, said that they have been getting signals of a poor economy not just from within the country, but also overseas. He says that these signals are making customers rethink their spending behavior which has resulted in reduced spending using credit cards.
The reduced spending on credit cards does not imply that customers did not spend on anything else at all. According to the G.19 Federal Reserve report, various aspects of non revolving credit such as home loans, student loans, auto loans, boat loans, trailer loans and loans for mobile homes increased by 11 percent and stood at $1.67 trillion. This figure is the highest that has been recorded in the last 6 years. This leap in the overall non-revolving credit was high enough to push the overall debt higher for the tenth straight month. There was a 76 percent overall increase in debt which is the highest since 2008.
The sudden downturn in spending is attributed to the shaky economy which is making customers anxious. The founder of one of the non-profit debt management and counseling agencies, Howard Dvorkin, said that customers are treading carefully since they don’t want to be immersed in debt again. A majority of debt management agencies and credit counselors are encouraging customers to clear off their outstanding balances on credit cards at the earliest. The credit counselors feel that with so much of uncertainty prevailing in the economy, one can never be sure when they are going to be hit with higher interest rates and other cost changes. This could also be one of the reasons for the fall in the revolving debt in the month of July.
