Fewer people using credit cards but still borrowing money

Increasing quantities of individuals are borrowing money, however more people are getting personal loans instead of using credit cards. The Federal Reserve recently published data on consumer borrowing for the month of January. Borrowing increased by several billion dollars for that month, however people were mostly using non-revolving sources of credit. The report also covered use of credit cards. People are paying off their credit card debt in droves.

Consumer borrowing occurring more often leaving to higher debt amounts

Americans are borrowing cash from loan providers again, and it is reflected in the recently released report by the Federal Reserve detailing economic activity from Jan. of 2011, in accordance with Business Week. The January debt increase came from sources for instance auto loans and personal loans that are non-revolving credit sources. The revolving lines for instance credit cards weren’t the reason for this. Non-revolving debt increased by $9.26 billion, however consumer debts increased overall by an estimated $5 billion, in the fourth straight month of increasing numbers of individuals going to lenders for credit. For the sixth straight month, auto lending went up. This is what led experts to believe the increase came from auto sales, reports MSNBC.

Using credit cards less likely

Credit card use has been plummeting for some time, as the amount of debt held by Americans on credit cards declined by $4.25 billion. For the first time since Dec. 2008, charge card debt has increased in December 2010 although it went down 28 of the last 29 months. Credit card charge-offs, or debts written off by charge card businesses, declined to 7.45 percent for January 2010. Delinquencies and charge-offs have been declining for the past five consecutive months. A Dec. shopping spree was done though which credit cards seemed to be used for, although that was paid by Consumers quickly. There have been increases in charge card interest rates noted. Banks and businesses have not been able to add fees and change interest whenever they want causing them to have high interest rates and fees to start with.

More debt taken out by students

There was a $24.9 billion increase in student loans from the federal government in January 2011 as part of the non-revolving debts increase. Faster or later the students will have to borrow from private investors instead of from the government. This is because federal budget cuts will decrease capital available more than likely. The federal spending budget recently submitted by the House of Representatives cut more than $5 billion from the Pell Grant program, according to the Christian Science Monitor, though the Pell Grant program is expected to run a $20 billion deficit starting next year. When it comes to investments, a lot of people still consider college educations one of the most essential. Still, college costs have gone up a ton in past years.

Articles cited

Business Week

businessweek.com/news/2011-03-07/consumer-credit-in-u-s-increased-5-01-billion-in-january.html

MSNBC

msnbc.msn.com/id/41954342/ns/business-consumer_news/

Christian Science Monitor

csmonitor.com/USA/Education/2011/0225/Washington-trims-Pell-Grants-How-will-students-pay-fall-tuition