After a mildly hopeful post-holiday uptick in revolving credit outstandings, consumers have paid down the large part of 2013’s revolving asset growth. As with the previous few years, consumers appear uncomfortable increasing their borrowing on cards, and largely pay off their Q4 increase in card-based borrowing in Q1 of the new year.
While total consumer borrowing increased slightly during the month, revolving credit, a category dominated by credit card debt, fell 2.4% in March at an annual rate , the first decline this year, a Federal Reserve report showed Tuesday.
The step back after two months of increasing credit card debt suggests consumers were less willing to take on higher balances in order to keep spending. January tax increases took a bite out of most workers’ paychecks.
While consumers have yet to establish any consistent growth pattern in card-based borrowing since card assets reached their peak in 2008 and declined during the recession, borrowing for non-revolving purchases continues to increase.
The gain was entirely due to an increase in nonrevolving credit, which includes student loans and auto financing. That borrowing increased 6% in March at an annual rate compared with an 11% jump in February.
The smaller increase largely comes from auto lending, which eased in March after consistent growth over the prior year, O’Keefe said.
The student-loan market, now dominated by the government, has expanded steadily during the economic recovery. Federal education lending rose by $3.9 billion in March to $560.8 billion. That number is reported without seasonal adjustments.
While consumers clearly are prioritizing non-revolving purchases over more discretionary spending, clearly obligations for major purchases like autos and education compete for consumers’ financial resources, and may contribute to an unwillingness to take on credit card debt.
