Rise in Credit Card Use Bolsters US Consumer Credit - Credit News | Financial Buzz

Rise in Credit Card Use Bolsters US Consumer Credit

Spending, Consumer, Credit, News, Consumer spending took a turn for the positive as Americans increased their credit card spending, signaling an increase in US consumer credit. The total amount of consumer credit rose to $3.18 billion, a rise of $26.85 billion, as per statistics published by Federal Reserve on June 6. It signifies annual consumer growth to be 10.2 percent, the quickest rate of growth when considered from July 2011.

More than expected

Analysts who were polled by Reuters (NYSE: TRI) were expecting an increase of $15.5 billion, less than what actually rose. Revolving credit, that primarily measures usage of credit cards, increased by $8.8 billion.  US consumers had not added such a huge quantum of revolving debt in a single month since November 2007.

In case of non-revolving credit, including auto loans and student loans given by the government, the rate increased in April to $18 billion.

Reason for increased spend

Increased employment prospects and rise in home values as well as stocks are providing consumers the new found confidence to borrow again after many years of paying off debts. The figures highlight an increase in spending at shopping malls and automobile dealers. This assists the economy to jump back from the slump in its first quarter.

According to Millan Mulraine, TD Securities in New York, a consumer’s ability to take on debt has markedly improved. This is vital to make the economy a self-sustaining one and take it to a trajectory of growth.

Growth in employment

The month of May saw 217,000 new jobs being added after a gain of 282,000, as per a report by the Labor Department. It was the fourth consecutive month of payroll increase when the numbers crossed 200,000. This is first instance from the period between September 1999 and January 2000. This increase in consumer credit was largest since there was a break in Federal Reserve’s series as a result of methodology changes in December 2010.

A larger number of banks are exhibiting increased willingness to increase the finance of car purchases and credit card use, thanks to rising competition, as well as growing demand. This fact came to light after the Federal Reserve conducted a survey that included the loan officers working at 74 US banks and also at 23 US branches of foreign-owned banks.

Every US bank has reported the relaxation of standards or the terms set on industrial and commercial loans. It was prompted by an increased assertive competition from other banks and bank lenders.

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