Consumers Continue Cutting Debt in Third Quarter
Since the onset of the national recession, millions of consumers have worked hard to reduce the amount of money they owe to lenders on all types of accounts, and those efforts continued to be effective 
in the third quarter of the year.
The total amount consumers owed on all types of credit dipped by $60 billion between July and September to a total of $11.66 trillion, according to the latest Quarterly Report on Household Debt and Credit released by the Federal Reserve Bank of New York. That's a decline of roughly 0.6 percent from the previous quarter's total of $11.72 trillion.
"The decline in outstanding consumer debt reveals that households continue to try and deleverage in the wake of a challenging economic environment and large declines in home values," said Andrew Haughwout, vice president in the research and statistics group at the New York Fed. "However, our findings also provide evidence that consumer credit demand continues to increase, a positive sign for consumer sentiment."
Perhaps the biggest reason for the drop in consumer credit use was that mortgage balances slipped 1.3 percent, or $114 billion, the report said. This came even as non-real estate debt rose by 1.3 percent to a total of $2.62 trillion.
Meanwhile, the total amount consumers had in terms of credit card limits fell by roughly $25 billion, as the number of total accounts fell 6 million to a new total of 383 million, the report said. This total is now 23 percent lower than the all-time high observed in the second quarter of 2008, and the amount owed on them is roughly 20 percent below the record peak set in the fourth quarter of that same year.
At the same time, the amount of consumer delinquency across all types of credit rose at the end of September to a total of 10 percent, the report said. That's up from June's total of 9.8 percent. In all, approximately $1.2 trillion of consumer debt is behind on payments, with $834 billion of that more than 90 days late.
Consumers have been more cautious about borrowing in general, and particularly on their credit cards, in recent years, but have begun to warm to the idea as the effects of the recent recession continue to decline nationwide.
5-7-2012
by Chris Martin
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by Dan Seitz
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by Neil Hayashi
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