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Credit balance dropping in consecutive months

By Faye Mergel
Published: Sunday, November 21st, 2010

02For twenty-five straight months, consumer debts have plunged to eight million dollars in the third quarter of the year 2010, according to the Federal Reserve. This is considered to be a record. With the economy still in the period of recovery, more consumers still opt to use their credit cards as a means of survival. As a matter of fact, the Fed said that there was a 12.1% plunge on consumer balance on their credit cards and the decline started as early as 2008. The credit card balance just keeps on falling due to a lot of people still trying to cope up with the economy.

But contrary to this, some authorities in credit and credit cards issuers say that after all the reported plunge in the economy and credit balance occurring this last quarter, they still see some growth on credit card balance. According to Robert A.Dye, PNC Financial Services Group senior economist, even if the economic recovery is in a moderate speed, this could still be a good thing and is expected to rise these coming days.

Due to the recession that hit the whole world especially the U.S and with the economy recovering slowly, lenders and banks are now more careful with whom they lend and invest their money with. With this, there had been a very low credit limit offered lately. This action by the bank resulted to encouraging the consumers to be wiser and make some effort to pay off their existing credit balances. Most of the consumers nowadays are more anxious not to go over their limits. This then has resulted in the dropping or declining of revolving balances that reached to $813.9 billion which was then $822.2 billion. This shows that credit card holders are now given lower credit limits compared to the earlier years. According to government statistics, there was an estimated elimination of about $2,957 on credit card debts for every average American family.

The level of debt still went high despite the effort from the consumers to eliminate their credit balance. In a wider perspective, there was as increase of 1.1 percent in consumer debts which led to a $2.41 trillion increase in September 2010. The decline had been reported to have occurred seven months in a row. Credit balance includes those that of home loans, car and student loans. In the third quarter of 2010, there had been a decrease in the delinquency rate according to Fitch Ratings. A proof that Americans can learn how to be wiser when economy gets weak.

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