Americans cut their credit card balances in August for the sixth consecutive month, the Federal Reserve System reported Wednesday (Oct. 7).
Revolving debt — mainly credit card debt — as reported by the central bank declined by $9.4 billion in August compared with July. The figure now stands at its lowest level since 2017. Economic forecasters surveyed by Bloomberg had, in the whole, predicted an increase in credit card spending.
On the lending side of the equation, credit unions picked up a slightly larger share of total outstanding revolving debt in August, compared to July. Finance companies held steady and banks saw a slight decline in their share of revolving debt held.
One reason may be that economic difficulties brought on by the COVID-19 pandemic have pushed some Americans to non-traditional lending sources.
Non-revolving debt — automobile loans are a major source — increased marginally. The Fed’s data doesn’t include borrowing secured by real estate, such as residential mortgages. Banks, finance companies, credit unions and the federal government added to their holdings of non-revolving debt in August compared with July.
Non-profit institutions, including colleges and universities, shed some non-revolving debt. Their total non-revolving debt held is at its lowest level in at least two years.
Rates for major types of consumer borrowing from commercial banks fell in August 2020, compared to August 2019, on average. A four-year auto loan from a commercial bank carried a 4.98 percent rate compared with 5.39 percent a year ago. The average credit card interest rate for a commercial bank during the most recent August was 14.58 percent compared with 15.05 percent a year earlier.
The figures don’t reflect any changes in behavior by borrowers, or potential borrowers, that may have occurred after the federal government’s $600-a-week stimulus program wound down Aug. 31.
