MarketNeutral
7th April 2010, 01:57 PM
U.S. households paid down their debts in February for the 15th time in the past 17 months, the Federal Reserve reported Wednesday.
Outstanding consumer credit dropped by $11.5 billion, or a 5.6% annual rate, to $2.45 trillion in February following an upwardly revised $10.6 billion increase in January. Debts had declined for 12 straight months before January's increase and are down 5.2% from the peak in July 2008.
In February, revolving credit, such as credit cards, declined by $9.4 billion, or a 13.1% annual pace, to $858.1 billion. It's the third largest decline in revolving credit in the past 32 years. Read more on the Fed's website.
Non-revolving credit, such as auto loans, student loans and personal loans, fell by $2.1 billion, or a 1.6% annual rate, to $1.59 trillion in February.
The Fed's data on consumer debt does not include mortgages or other debts backed by real estate, which are reported separately.
Outstanding debts can fall because consumers paid back more than they borrowed or because lenders wrote down the debt as uncollectable. Both factors have been important in the decline since the summer of 2008.
In 2009, charge-offs on consumer loans by banks increased by $18 billion to $52.2 billion, while outstanding debts fell by $112 billion to $2.45 trillion.
As of the fourth quarter of 2009, households were paying 12.6% of their disposable income to service their debts, down from 13.9% at the peak of the credit bubble in 2007. That's the lowest debt-to-income ratio since 2000. In the early 1990s, households were paying less than 11% of disposable incomes to service their debts.
In a separate report Wednesday, the American Bankers Association said delinquencies on consumer debts owed to banks declined once again in the fourth quarter. The aggregate delinquency rate for eight different types of loans fell to 3.19% in the fourth quarter from 3.23% in the third quarter. For bank credit cards, the delinquency rate fell from 4.77 % to 4.39 %. See full story.
"Clearly, consumers are shoring up their finances and banks are putting losses behind them," said ABA chief economist James Chessen.
http://www.marketwatch.com/story/consumer-debt-falls-by-115-billion-in-february-2010-04-07-152300
Outstanding consumer credit dropped by $11.5 billion, or a 5.6% annual rate, to $2.45 trillion in February following an upwardly revised $10.6 billion increase in January. Debts had declined for 12 straight months before January's increase and are down 5.2% from the peak in July 2008.
In February, revolving credit, such as credit cards, declined by $9.4 billion, or a 13.1% annual pace, to $858.1 billion. It's the third largest decline in revolving credit in the past 32 years. Read more on the Fed's website.
Non-revolving credit, such as auto loans, student loans and personal loans, fell by $2.1 billion, or a 1.6% annual rate, to $1.59 trillion in February.
The Fed's data on consumer debt does not include mortgages or other debts backed by real estate, which are reported separately.
Outstanding debts can fall because consumers paid back more than they borrowed or because lenders wrote down the debt as uncollectable. Both factors have been important in the decline since the summer of 2008.
In 2009, charge-offs on consumer loans by banks increased by $18 billion to $52.2 billion, while outstanding debts fell by $112 billion to $2.45 trillion.
As of the fourth quarter of 2009, households were paying 12.6% of their disposable income to service their debts, down from 13.9% at the peak of the credit bubble in 2007. That's the lowest debt-to-income ratio since 2000. In the early 1990s, households were paying less than 11% of disposable incomes to service their debts.
In a separate report Wednesday, the American Bankers Association said delinquencies on consumer debts owed to banks declined once again in the fourth quarter. The aggregate delinquency rate for eight different types of loans fell to 3.19% in the fourth quarter from 3.23% in the third quarter. For bank credit cards, the delinquency rate fell from 4.77 % to 4.39 %. See full story.
"Clearly, consumers are shoring up their finances and banks are putting losses behind them," said ABA chief economist James Chessen.
http://www.marketwatch.com/story/consumer-debt-falls-by-115-billion-in-february-2010-04-07-152300