Magazine article American Banker

Rising Tide of Credit-Card Debt Leaves Fed, Analysts Unperturbed

Magazine article American Banker

Rising Tide of Credit-Card Debt Leaves Fed, Analysts Unperturbed

Article excerpt

WASHINGTON -- Consumers are on a credit-card tear again with the friendly help of commercial banks, according to the most recent Federal Reserve data.

While the consumer debt figures look unsettling at first, analysts and Fed officials say buyers are simply showing a renewed appetite to spend, especially on autos, without getting too far into hock.

Installment debt in September jumped at an annual rate of 10.5%. with auto credit up 10.2%. Revolving credit. which is used for credit-card purchases at department stores and service stations, shot up 13.5%.

Rising Pace

In fact, consumers have been taking on debt at a steadily rising pace since June, when outstanding credit rose 3.4%, followed by gains in both July and August of 8%. Credit-card debt has been hottest of all, rising 16.4% in July, 17.1% in August, and 13.5% in September.

Commercial banks have been supplying much of the credit.

From January to September, while consumer debt increased 3%, debt held by commercial banks rose 5.9%, and debt held by credit unions jumped 12.0%. Debt held by finance companies fell 2.9%, and other decreases were posted by savings institutions and retailers.

Auto credit increased $15.7 billion, or roughly two-thirds of all additional debt taken on by consumers during the first nine months of the year. But while total auto credit expanded 6.1%, commercial banks put 10.1% more on their books. Revolving credit rose 4.6% overall, but 5.4% at banks.

Tony Riley, director of research for Gary Shilling & Co. …

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