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Credit Down, Cards Up

By Sally Maison
Published: Tuesday, October 13th, 2009

The much anticipated Federal Trade Commission consumer credit report was finally released yesterday only to reveal another decline in US credit. According to the report, consumer credit was down again for the seventh straight month, with experts dissenting over its main driving factor. But card rates took a detour from the national trend, as it showed a fractional rise in statistics.

Credit Down, Cards UpFTC report says consumer credit fell again for the seventh month in a row, the eleventh in past thirteen months. It dropped by $12 billion in August, significantly big margin from the projected $10 billion drop by economists. Revolving debt, which involves credit and department store cards, went down from $909.3 billion to $899.0 billion, a margin of $9.91 billion. Meanwhile, non-revolving debts fell by $2.07 billion. Previously, student, auto, and mortgage loans totaled $1.57 trillion. Now it stands precariously at $1.56 trillion.

Expert opinions vary over the cause in credit decline. Some say consumers who have just undergone a long recession lost their appetite in acquiring for more debts and are currently more bent on cleaning their balance sheets. Others say banks are still holding their money tight, refusing to let down their lending standards. Hence, increased loan denials easily led to decreased debt rates. Federal government says it will continue its effort in cracking down on predatory lenders who take advantage of currently tight lending standards.

Despite steady freefall in consumer debt rates, analysts note that card rates rose amidst criticism and impending federal legislations that will impose more sanction on lenders. It is observed that commercial bank rates generally declined except card subscription which is up by .39 percent. Visa had its shares went up by 3.8 percent by trading 12.3 million, a surge from its daily average of 5.5 million. MasterCard likewise saw a surge, doubling its daily average and pushing its shares up by 5.1 percent. Specialists say they are counting on government regulations, more consumer-friendly bank offers, and increased debt activities by Americans to break through the economic freeze.

Meanwhile, leading aluminum producer Alcoa boosted its rating by swinging its profits up before Wall Street closed yesterday. Market analysts point out to increase in auto production as the primary driving factor for its A+ performance. However, worldwide demand, particularly by China, is considered the main driver in Alcoa’s rise.

Experts say Alcoa’s increased profit and increased card rates give Americans more reasons to be more optimistic as US GDP rate increase is finally making itself felt. They add better consumer credit reports could be expected in the future.

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