Consumer borrowing increased in January for the first time in a year, the Federal Reserve has reported, in what is definitely a bullish sign for the stock market.
The increase, according to LowCards.com, is even more significant since it occurred despite another drop in credit card loans.
According to the Federal Reserve, total consumer borrowing rose to $2.456 trillion in January, an annual rate of 2.5 percent. The increase came from nonrevolving credit like auto, personal and student loans that rose at a 5 percent annual rate. Revolving credit, which is primarily credit card usage, fell for the 16th consecutive month, decreasing at an annual rate of 2.3 percent, according to LowCards.com
Recent studies underscore some clear trends either taking place or projected for credit card usage, the Internet company said.
* Credit card usage has dropped substantially over the past three years, from 87 percent of consumers surveyed in 2007 to 56 percent in 2009 (Javelin Strategy and Research).
* Debit card usage is increasing significantly. According to their annual reports, MasterCard’s debit card usage increased 10.5 percent in the United States while Visa reported a 17 percent increase. MasterCard also reported its credit card usage dropped 13 percent.
* The number of new credit cards issued declined 45 percent last year, according to Equifax Consumer Credit Trends.
*The average balance on Visa, MasterCard, and American Express accounts dropped 5 percent to $5,434 in the fourth quarter of 2009 from $5,729 in the fourth quarter of 2008.
* According to a BIG Research survey in January 2010, 30.5 percent of respondents said they would pay with cash more often, up from 23.0 percent a year earlier.
* The same study showed consumers are concentrating on eliminating debt: 37.9 percent are prioritizing paying down debt over the next three months, rising from 34.4 percent in December.
* Issuers will reduce credit card lines by $2.1 trillion in the next 18 months, wiping out nearly 45 percent of the spending power U.S. consumers now have on credit cards, predicts investment bank Oppenheimer & Co.
“We know that over the past 18 months, banks cut credit limits for 58 million cardholders.” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
“If issuers keep this up and cut 45% of the spending power on credit cards, they will be forcing consumers to continue to reduce their usage of credit cards and find alternative forms of payment like debit cards and cash. That might not be a bad thing for the financial well being of the American consumer.”
LowCards.com ( http://www.lowcards.com ) simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card. The LowCards.com Complete Credit Card Index ( http://www.lowcards.com/CreditCardIndex.aspx ) is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for all 1060 credit cards offered in this country. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for ten years.
For more information, contact Bill Hardekopf at 800-388-1910 or billh@LowCards.com.
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