Americans Willing to Take A Chance On Credit Again (Forbes)   Leave a comment

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In what appears to be a rare piece of good news for today’s economic climate, the Federal Reserve reports that consumers are willing to carry a bigger balance on their credit cards. They report a 5 percent increase on the average credit card balance, making this only the second time in 33 months that the average credit card balance has increased. It is also the largest increase since June of 2008.


Some are taking this as a sign of returning consumer confidence in the economy.
A few factors may be in play for this new sense of confidence. Many banks have relaxed their lending policies, and are aggressively offering non-revolving loans such as student, auto, boat, and trailer loans. Overall consumer credit, including both revolving and non-revolving loans, rose 2.5 percent to $2.4 trillion this May, and shows no sign of slowing. Rising levels of consumer credit have been notched in each of the last eight months, the longest consecutive rise in consumer debt since 2008.


As when any industry starts to fight for the consumer dollar, the consumer enjoys some nice benefits. Many lenders are not only relaxing their policies, but offering low interest rate credit cards as promotions. Combined with consumers renewed desire to pay down their debt as quickly as possible, the lower interest rates help to make this a possibility. Of course when the balances on credit cards are low, the more likely the consumer will make further purchases. This is the path politicians and the financial industry have been waiting for – the return of American confidence in the economy.
The Federal Reserve’s monthly credit card report also points to a lowering of the rate of interest assessed on existing cards with balances. The average rate fell to 13.10 percent, down from 14.48 percent this time last year on accounts already carrying a balance. Unfortunately, the APRs for new cards are on the rise, with a reported average of 14.91 percent.
According to Equifax, an increased number of consumers are being offered credit, and the offers are not just for those with the best credit.Credit card applications are being approved for many who previously may have been rejected. While the qualifications for acquiring a credit card may be somewhat more lenient than in the recent past, they are nowhere near the easy lending practices that many feel contributed to the waves of delinquencies that hurt the banking industry over the last few years.


Posted July 18, 2011 by ilanamelissagreene in Uncategorized

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