The amount of debt carried by consumers fell in July, driven largely by a substantial dip in the amount being carried on Americans' credit cards. Further, the amount of installment loans ticked up only slightly after months of significant increases.
In all, the amount of non-mortgage debt carried by Americans slipped 1.5 percent on a year-over-year basis to a total of slightly more than $2.7 trillion in July, down from nearly $2.71 trillion the previous month, according to the latest monthly consumer credit statistical release from the Federal Reserve Board. That decline was due to a sizable drop in the amount of outstanding debt on credit cards consumers had in their names.
In all, revolving credit - debts that can be added to and subtracted from over the life of the account, and therefore comprised primarily of credit cards - slipped 6.8 percent on an annual basis, falling to just $850.7 billion, down June's $855.5 billion, but up from the $847.1 billion observed in July 2011. However, it should be noted that apart from a sharp increase between April and May this year, balances on credit cards have held within a few billion dollars of $850 billion for much of the last year, and are still well below the figures seen since 2006 began.
The most recent data for interest rates on credit cards also indicates improvement, the report said. Through the end of May, the average APR for credit cards controlled by commercial banks was just 12.06 percent, compared with the 12.34 percent observed at the end of the first quarter. Further, the rate for accounts assessed interest during the month slipped to 12.76 percent from 13.04 percent.
Meanwhile, even as consumers cut the debt on their credit cards, they also took on more debt for nonrevolving credit once again in July, the report said. On an annual basis, the amount of debt taken on increased 1 percent to close to $1.86 trillion, a narrow jump from June's more than $1.85 trillion. This was also the smallest increase in this type of borrowing, which takes into account all installment financing except mortgages, and is largely made up of auto and education loans. In July 2011, this type of borrowing totaled just $1.74 trillion.
In general, consumers have been somewhat successful in cutting debt on their credit cards since the end of the recent recession, though a large portion of the total amount of Americans' slashed outstanding balances came in the form of charge offs. However, borrowing on credit cards has plateaued somewhat in recent months, indicating that consumers might have reached the point at which they are generally comfortable keeping their outstanding balances. During this time, instances of charge offs and delinquencies have continued to fall, potentially showing that consumers are also more comfortable in dealing with these accounts going forward.