Washington, DC, United States (4E) – Americans are cutting back credit card balances for the third straight month in August, according to a U.S. Federal Reserve report released Monday in Washington, an indication that U.S. consumers may be growing more cautious about the economy’s health.
Revolving credit, which shows money owed by consumers on credit cards, dropped by a seasonally adjusted $883.4mn in August, or at a 1.25 percent annual rate, according to the Fed.
However, other types of consumer borrowing picked up in August. Non-revolving debt, which includes financing motor vehicles and college tuition and motor vehicles, advanced $14.5bn, or at an annual rate of 8.0 percent, in August. That type of debt has steadily climbed in the past two years.
Higher home values and improved household wealth have prompted consumers to take advantage of lower borrowing costs for big-ticket purchases like automobiles. Yet, credit-card lending fell for a third month, evidence that Americans are being deliberate in increasing their debt to finance other purchases.
That could pose a problem for the economy, which relies heavily on consumer spending to maintain growth. That is even more critical now with the U.S. federal government shutdown, beginning last week, threatening to reduce public-sector spending for the rest of the year and causing hundreds of thousands of workers to be furloughed.