Number of individuals borrowing cash increases but not credit cards

Credit sources such as personal loans are becoming the more popular methods of borrowing cash for American Consumers, who are staying away from credit cards. The Federal Reserve recently published data on consumer borrowing for the month of January. Borrowing increased by several billion dollars for that month, however people were mostly using non-revolving sources of credit. Individuals are avoiding charge cards in droves, and paying off their balances after the holiday shopping spree. Source of article – Consumers borrowing more money but not from credit cards by MoneyBlogNewz.

More Consumers borrowing mean more debt

Business Week states that more Americans are borrowing from loan providers which the Federal Reserve report on economic activity from Jan 2011 shows. Several non revolving credit sources, including auto loans and personal loans, were used rather than revolving lines of credit such as credit cards in this debt boost in Jan. There was an increase of $9.26 billion in non-revolving debt with an overall $5 billion increase in consumer debts with this being the fourth straight month of numbers increasing for loan companies. MSNBC reports that strong auto sales caused the huge increase since the auto lending cash lent went up for six months in a row.

Fewer people using charge cards

For a while now, charge card use has been going down while Americans have had a $4.25 billion decrease in the amount of debt held. For the first time since Dec. 2008, charge card debt has increased in Dec. 2010 although it went down 28 of the last 29 months. In January 2010, there was a decrease in charge card charge-offs of 7.45 percent. The last five months in a row showed delinquencies and charge offs declining. A December purchasing spree was done though which charge cards seemed to be used for, although that was paid by Consumers quickly. Charge card rates of interest have been steadily increasing as new regulations prevent banks and card corporations from applying fees surreptitiously, forcing them to raise fees and rates of interest up front.

More debt taken out by students

There was a $24.9 billion boost in student loans from the federal government in Jan 2011 as part of the non-revolving debts increase. More than likely, the federal spending budget cuts will take away what is available meaning students will have to start using private lenders rather than the government soon. Over $5 billion in Pell Grants were cut from the federal spending budget in the proposed bill the House of Representatives just got although starting next year, a $20 billion deficit is going to be run by the Pell Grant Program alone, reports the Christian Science Monitor. For years, the cost of a college education has gone up even though it is still considered the best investment an individual can make.

Articles cited

Business Week

businessweek.com/news/2011-03-07/consumer-credit-in-u-s-increased-5-01-billion-in-january.html

MSNBC

msnbc.msn.com/id/41954342/ns/business-consumer_news/

Christian Science Monitor

csmonitor.com/USA/Education/2011/0225/Washington-trims-Pell-Grants-How-will-students-pay-fall-tuition