According to the Federal Reserve System, the total amount of consumer credit fell at an annual rate of 8.5 percent in November, which translates to a total of $17.5 billion. That furthers a trend that has seen total consumer credit dropping since the fourth quarter of 2008.
Both revolving and nonrevolving credit decreased during the month, though the former made the more significant decline in percentage. The Fed report noted that revolving credit, which consists mainly of credit card debt, fell $13.7 billion, which comes to an annual rate of 18.5 percent.
Though this drop may suggest that consumers are trying to reduce the amount of credit card debt they have, it could also mean that lenders are being forced to write off more of their accounts as consumers continue to find difficulty paying what they owe.
A recent report from Fitch Ratings noted that delinquencies of more than 60 days on credit card debt hit an all-time high in December at 4.52 percent. Furthermore, charge offs – which are debts lenders no longer expect will be repaid – reached 10.68 percent in the month.
Though charge offs are not at the 11.52 percent high seen in September 2009, the increase in delinquencies may indicate that the number of defaults will increase as people continue to struggle with debt management.
What remains to be seen is how much debt levels will fall or increase in December, when some consumers may have relied on credit card debt in order to make ends meet during the holiday shopping season.
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