Credit card debt increases, delinquency rates drop: Federal Reserve

New data released by the Federal Reserve on Monday indicates that American consumers increased their credit borrowing in the month of May, the fastest rate in roughly one year and the highest since autumn of 2010. The central bank’s monthly consumer credit report showed a near $20 billion increase.

In total, consumers have borrowed money for a grand total and an all-time high of $2.84 trillion – total credit card debt, though, is still worth more than $847 billion. In addition to this data, collective auto and student loan borrowing increased $13 billion in the month of May, which is the fastest increase since February of this year.

For the entire 2013, credit card debt has risen $15.8 billion, which is quite a distance from the high of $50 billion annual increases that were recorded prior to the beginning of the Great Recession in 2007 and 2008.

However, credit card delinquency rates have reached their lowest level since 1990, according to a separate American Bankers Association (ABA) report. Credit card payments that are late by more than 30 days declined to 2.41 percent. It appears that some consumers had limited their credit card usage and maintained a focus on paying down debt.

“Sharply lower delinquency levels reflect improving consumer balance sheets, steady job creation and a continuing increase in household wealth,” James Chessen, ABA’s chief economist, said in a press release. “Many consumers have learned the hard lessons of recession, and have redoubled their efforts to keep debt at manageable levels.”

At the start of the recession, credit card delinquency rates hit a high of five percent and issuers had frozen credit and wrote off bad debt.

Finance experts say that even though credit card debt did increase its usage should not reach pre-recession levels. Many expect that revolving credit will undergo small changes, but student loan debt will be a major issue as it will continue to grow.

With many coming to the conclusion that the overall economy is improving, experts are pointing to credit card incentives as a signal that the worst is over. Citibank, for instance, has a new card called Simplicity that allows its clients to pay late or miss a payment without a penalty in case of emergency. The Discover It card also permits its clients to miss a payment if something comes up.

However, it has been argued that longtime customers who maintain a sublime record could also receive the same kind of benefits if they simply ask customer service. “You can certainly negotiate with customer service, ‘I’ve been with the card for 10 years, 20 years whatever, I’ve never been late before, there were some circumstances that came up.’ They will waive it,” said Edgar Dworsky of www.consumerworld.org.

In the United States, total personal debt stands at more than $15.8 trillion: $12.99 trillion in mortgage debt and $1 trillion in student loan debt. This equates to more than $50,000 in debt per person – this does not include the national debt that the American people owe, which is $148,428 per taxpayer.

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