Credit Card Review Blog

Consumer Credit On The Rise

Consumer Credit On The Rise

Consumer behavior is a shocking phenomenon. Since the recession began, consumers have been put on alert. During the months of October, November and December 2008, consumers drastically reduced their credit card debt. However, the story completely changed in January 2009.

The Federal Reserve recently reported that consumers increased their debt in January. We aren’t talking about by a small amount either. We are talking about consumer debt increasing by $1.76 billion. This new statistic completely goes against everything economists had predicted for the 2009 kick-off month.

This shocking increase in consumer debt was both due to an increase in use of non-revolving credit lines, as well as revolving credit lines. In January alone, credit card borrowing went up by 1.16 percent. That is approximately $926 million. Borrowing in terms of non-revolving loans went up by 0.62 percent. That equates to $830 million.

Revolving debt is debt that is acquired through a credit card or other means. Revolving debt is “revolves” because the general idea is to pay off the debt each month. Automobile loans, for example, falls under the category of non-revolving credit because payments are made to reduce the debt on the loan.

Here’s another shocking statistic for you. This large jump in consumer debt is the smallest jump since May 2006. Could that possibly be a sign? Could we be in this recession because consumers got too used to taking on too much debt? American consumers obviously fell into the bad and dangerous habit of taking on more and more debt, without worrying too much about paying off the debt.

Thus, the crash of the housing market. If every American was in a home that they could actually afford, the housing crisis would not have become this bad. The fact of the matter is that Americans were too irresponsible with their money for too long. Now, Americans (in general) are looking to the government to save them.

Should the government save consumers who were completely irresponsible with their finances?