Consumers relied a lot less on their credit cards in April with debt in that area rising at the slowest pace in nearly three years.
The Federal Reserve said Friday that consumer borrowing increased at an annual rate of 4.2 percent in April, slower than the 6.2 percent increase of March.
The slowdown reflected the fact that borrowing in the category that includes credit cards rose at an annual rate of just 0.4 percent, the weakest performance since borrowing in this area actually declined at a 1.8 percent rate in May 2005.
The slowdown in growth in credit cards and other revolving debt was offset somewhat by a surge in borrowing for auto loans and other types of non-revolving credit, which jumped at an annual rate of 6.5 percent, up from the March rate of increase of 5.5 percent.
The overall rate of increase in consumer credit of 4.2 percent followed a March jump of 6.2 percent which had been the fastest advance since an 8.2 percent growth rate in borrowing in November.
The $8.95 billion increase, which was a little above expectations, pushed consumer borrowing to an annual level of $2.56 trillion, a new record.
The slowdown in reliance on credit cards followed a period of heavy use by consumers who had been forced to charge more of their purchases on their cards as banks have tightened lending standards for home equity loans in response to the deepening crisis for debt secured by mortgages.
Mark Zandi, chief economist at Moody’s Economy.com, said that consumer borrowing could briefly slow in coming months if people use the economic stimulus checks they are now receiving to pay down their credit card balances. However, he said he expected such paydowns to be only temporary with tough economic times forcing consumers to start relying on their credit cards once again.
“Credit card borrowing will remain strong because it has been all but impossible to borrow against your home by using a home equity loan with home prices falling and lenders tightening up on their standards,” Zandi said.
In addition, consumers are also increasingly relying on their credit cards to pay their soaring gasoline and food bills, he said.
The Treasury Department reported Friday that through the first six weeks of the program, the government has made 66.6 million economic stimulus payments totaling $56.83 billion. Total payments to individuals are expected to hit $106.7 billion this year.
The Fed’s measure of consumer credit does not include any borrowing secured by real estate.