American household debt dipped slightly in the second quarter, while demand for credit rose, according to a report by the New York Federal Reserve Bank released Monday.
Consumer debt slid to $11.4 trillion, down 0.4 percent from the first quarter. Mortgage debt — which accounts for 71 percent of all consumer debt — dropped by $20 billion, or 0.2 percent.
"This is more evidence that the pace of consumer deleveraging that began in late 2008 has slowed," Andrew Haughwout, vice president in the Research and Statistics Group at the New York Fed, said in a statement.
Consumer debt has fallen 8.6 percent from its peak of $12.5 trillion in the third quarter of 2008, but the pace of decline has slowed and even reversed in recent quarters.
Non-real estate debt — on cars, credit cards, student tuition and other items -- fell 0.4 percent to $2.28 trillion in the last quarter.
The number of open credit card accounts jumped by 10 million, hinting at a growing demand for credit. Credit card limits rose 2.1 percent in the second quarter, suggesting banks are more willing to lend.
While many economists are pleased with the decrease in consumer debt, most say more spending is necessary to drive a robust economic recovery.
Also, the nation's top credit card companies on Monday reported mixed progress in reducing the rate at which customers default on their accounts. Higher monthly default rates at Bank of America and Citigroup offset improvements for most other major card issuers.
Analysts said July's mixed results, along with the recent slowdown in the economic recovery, are unlikely to jeopardize a two-year trend of declining default rates. Most card issuers reported that fewer customers were behind on monthly payments in July. This should lead to fewer defaults late this year.
The default higher rates at Bank of America and Citi "are just monthly noise," Moody's analyst Jeff Hibbs said. "The overarching trend of improvement across the industry continues."
Three of the six top card issuers reported lower default rates in July, compared with the previous month. In terms of late payments, four of six had lower delinquency rates.
Bank of America Corp. continues to have the highest default rate among six major card issuers, but it is down substantially from the 14.53 percent the bank reported in August 2009.
The credit card division of Bank of America reported in a securities filing that it wrote off credit card balances at an annualized rate of 7.43 percent last month, up from 6.97 percent in June.