Fed: Card Use Falls For Fourth Straight Month

What's Next In Payments®
3:50 PM EST November 8th, 2013

By Michael Patrick McSweeney (@mpmcsweeney)

Newly released Federal Reserve data has revealed that consumer interest in services like car loans increased in September, but that Americans remain apprehensive about taking on new credit card debt heading into the holidays.

Total U.S. consumer credit grew by 5.5 percent, or $13.74 billion, in September, according to the latest release from the Fed, to reach $3.05 trillion. This was the biggest jump observed by the Fed in three months. The Fed further revised its figures for August, raising its estimates to $14.15 billion for August.

The report noted that consumers accessed more non-revolving credit during September, as this figure rose by $15.8 billion. However, the Fed indicated that use of revolving debt such as credit cards declined by more than $2 billion.

The third quarter data indicated an 8 percent overall increase in non-revolving consumer credit. Annual rates for revolving credit fell by 2.25 percent.

The report broke down the numbers for credit card use, auto loan origination and student loan origination. The data points to an overall conflicted consumer, with demand rising in non-revolving credit, but weakening for revolving debt.

Consumer Credit Card Use Continues Tumble

The report showed consumers continued to use credit alternatives such as cash and debit in September, as total revolving debt fell by $2.06 billion. This was the fourth consecutive month of declines, the Fed indicated.

Reuters suggested that this reduction is a reflection of weak consumer spending. The U.S. Commerce Department showed that consumer spending climbed just 0.2 percent in September, following a slightly stronger uptick of 0.3 percent in August.

Auto Lending Lifts, Despite CFPB Scrutiny 

Consumer demand bolstered car loans totals by $21.2 billion during the third quarter of this year, a modest increase from the second quarter’s $20.1 billion uptick.

Year over year, total auto loan origination rose from $798.2 billion to $861.7 billion. The news coincides with the CFPB’s announcement that it is looking into improper lending practices in the market. The CFPB is reportedly seeking to determine whether auto lenders are attempting to mislead consumers.

Student Loans Surge Amid Shutdown

Student loan origination growth jumped between the second and third quarters of 2013, rising from $38.7 billion to $141.6 billion. According to the Fed, there is approximately $1.214 trillion in outstanding student loans.

To further contextualize the changes the Fed observed in consumer finance, read our full report of its second-quarter findings here.

For more information about the Q3 2013 results, read the full Fed release here.

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