Figures released from the Federal Reserve on Wednesday showed that consumer credit had fallen for the seventh straight month in August, dropping 5.8 percent – or $12 billion – to more than $2.46 trillion.
Of this number, revolving credit – which consists mostly of credit card debt – fell $9.9 billion to $899.4 billion. The Fed notes that revolving debt has fallen at an annual rate of 13.1 percent, up dramatically from July’s number of 3.1 percent.
Since the third quarter of 2008, consumers appear to be cutting back on their debt with consumer credit falling $115.6 billion since the high point of $2.58 trillion at the end of the September of last year.
Meanwhile, non-revolving debt – which included loans for cars, education and boats – fell at a 1.3 percent annual rate to $1.56 trillion in August.
Sean Maher, an economist at Moody’s Economy.com, told CNNMoney.com he was surprised to see nonrevolving debt fall considering the increased auto sales in the Cash for Clunkers program. Still, he is not surprised by the overall numbers.
“But at the same time, unemployment is rising and people are weary of using credit cards as a stopgap measure,” Maher told the website. “If they don’t think they can find another job quickly, they won’t run up a debt burden and pay interest on it.”
The numbers from the Fed come on the same day Treasury Secretary Timothy Geithner was quoted by the German publication Die Ziet as saying Americans are going to have to save more, an issue he said other nations are “going to have to come to terms with.”
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