Monday, June 7, 2010

Consumer Credit Split

I wonder if this is the consumer taking advantage of low rates and locking them in for a longer period, but a definite divergence between revolving and non-revolving consumer credit.

Business Week details:

Consumer borrowing in the U.S. rose in April for the first time in three months, indicating a recovery in bank lending will take time to develop.

Revolving debt, which includes credit cards, dropped by $8.5 billion in April. The decline was the 19th straight and signals consumers are taking steps to reduce debt. A decline in late payments indicates they may be having some success.

Non-revolving debt, including loans for cars and mobile homes, increased by $9.4 billion in April, today’s report showed.

Source: Federal Reserve


  1. I would have to think about it but nothing off the top of my head as to the why.

  2. perhaps "haves" vs "have nots". those "have nots" aren't able to keep up the debt spree (defaulting / shut out of new credit) and were more likely to use credit cards (i.e. revolving). "haves" didn't have credit card debt, but rather car payments, loans, etc... and have been able to tap credit markets at lower rates.

  3. It might come down to the fact that a car loan has collateral and also auto industry finance companies are once again offering subsidized rates as low as 0%.

    Bank lending in just about every category is still falling.

    One other interesting change in that report is the big jump in Federal government lending non-revolving debt over the last few years. That's the big increase in government student loans.

    And one other thing to keep in mind. For most of the last 15-20 years, home equity loans and lines were used to finance cars, college and other consumer spending. Now that category of debt is contracting.