Consumers have generally been trying to get their finances in order since the end of the recession, and one way many have done so is by reducing the amount they borrow on their credit cards. But in March, that trend reversed itself considerably.
Though many Americans have been conscientious in recent years about the amount of credit card debt they carried, there was a spike in revolving credit in the month of March as more consumers carried a balance from one month to the next, according to the latest statistical release on consumer credit from the Federal Reserve Board. In all, the amount of debt owed on these accounts by consumers nationwide spiked 7.8 percent to a total of $803.6 billion in March, up from $798.5 billion in February.
This marked the first increase in credit card balances since the end of last year, when debts totaled $803.6 billion, the report said. As a consequence, this was the second consecutive quarter in which credit card borrowing increased. However, credit card balances are still significantly below the all-time high observed in December 2008, of nearly $989.1 billion.
And as consumers increased borrowing on their credit card accounts, many also dealt with higher interest rates on those cards, the report said. While the interest rates on all accounts slipped very slightly from the fourth quarter of last year to 12.34 percent from 12.36 percent, the APRs on accounts that were assessed interest charges rose sharply to an average of 13.04 percent from 12.78 percent at the end of last year.
Meanwhile, the amount of borrowing on nonrevolving loans - classified by the Federal Reserve as installment loans not including mortgages, such as those for education and automobile financing - increased even more significantly, rising 11.3 percent, the report said. Now, the amount owed on these lines of credit total nearly $1.74 trillion, up from just over $1.72 trillion at the end of February. However, unlike credit card borrowing, this type of borrowing has been steadily increasing for some time now. The amount owed on these loans has been steadily increasing since a slight decline in February 2011. Much of this increase was driven by student loans issued by the federal government, which rose by about $6.9 billion, to $460.2 billion from $453.3 billion in one month.
Overall, the amount of money consumers owed to lenders on their various lines of credit rose to a total of more than $2.54 trillion, up 10.2 percent from the previous month's slightly more than $2.52 trillion, the report said. That was the largest increase on a month-over-month basis, in terms of both percentage and dollar amount, seen since late 2001.
In general, consumers had been more conscientious about borrowing on cards since the end of the recession and were largely seen as moving toward becoming "transactors" - people who use their cards to make purchases but pay off their balance in full every month.
