Consumer Borrowing Spiked In April

cbsnews.com ^ | 6-7-06

[Hydroshock]

(CBS/AP) Americans increased their borrowing in April at the fastest pace in 10 months as credit card spending and auto loans both picked up.

The Federal Reserve reported Wednesday that consumer borrowing rose at an annual rate of 5.9 percent in April, a significant increase from a 0.8 percent gain in March.

It was unclear, however, how long the rebound in borrowing would last given a decline in consumer confidence during May that was attributed to worries about soaring prices for gasoline and other energy products.

The 5.9 percent rate of increase for overall borrowing was the biggest gain since borrowing rose at a 6.8 percent rate in June of last year.

The increase in dollar terms was $10.6 billion, which pushed total consumer credit to a record $2.17 trillion. The Fed's measurement of consumer credit does not include mortgages and other loans secured by real estate.

[Hydroshock]

ping

[pissant]

Good time to be a banker then.

[I still care]

Of course. It's tax month.

You have to pay your taxes, and you can't meet household emergencies. So you borrow.

I noted the auto loans. In April, things were terribly slow in the garage in which my son works. Nobody can afford to fix their cars after paying their taxes.

If they have good credit, they go out to buy new ones.

[Huck]

HR Block and Jackson Hewitt do a lot of business actually brokering loans against anticipated tax REFUNDS. RALs, they're called. Refund Anticipation Loan. They do very well in low income urban areas, where people tend to get refunds and be short on cash.

[dalereed]

Question?

What do they consider CC borrowing, unpaid ballance or total CC charges?

If it's total CC charges I get included for $2-3,000 each month but i've never not paid the balance in full each month, in fact I go the my account on line and pay it each month on the statement closing date.

[I still care]

Interesting. But my theory is, people who get refunds apply for them asap, and file in maybe Feb.

My guess is people who end up paying wait until April 15.

[Huck]

You're right. Those are the early filers. They actually get started in January, as soon as they get their W-2s. They can even get around the W-2 temporarily to do it even earlier. So yeah, that would have been February borrowing.

[parcel_of_rogues]

In February my bank offered me a MasterCard with 0% financing for 12 months. I've never run a credit card balance in my life but right now every household expense is being paid onto that card and I'm making the minimum payment with no interest.

Every penny that would have paid those expenses is sitting in a 11 month CD special paying 5% interest or online savings paying 4.65%. Did I also mention the card has a 1% cashback feature?

So I may be personally contributing to the spike in consumer debt while making money.

[ex-Texan]

Spend, spend, spend. Buy, buy, buy. Yada, yada "Nothing to see here. No foreclosures -- Not here, not today. Time to move on."

[dakine]

I think all the folks who borrow don't have access to a computer...
The people who respond to these threads all have stellar consumer credit habits, and sore arms....

[VegasCowboy]

LOL! Yep.

[RipSawyer]

If they have good credit, they go out to buy new ones.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

I don't doubt it, it is a typical reaction by the shortsighted, they can't afford a repair bill but they can afford one third of that same repair bill every month for the next six or seven years, not to mention a property tax bill equal to the repair cost in many cases, not to mention sales taxes. I doubt that I will ever own another new vehicle even if I should have millions fall out of the sky. I simply don't want to pay the county the huge property tax bill for a new vehicle.

[expat_panama]

do they consider CC borrowing, unpaid ballance or total CC charges?

The Fed's press release that Dan Rather's people are talking about listed lots of different Consumer Credit numbers, but CBS only took out what it wanted to make Americans look stupid.

Example: "The increase in dollar terms was $10.6 billion, which pushed total consumer credit to a record $2.17 trillion...   ...Economists are predicting that consumer spending, which accounts for two-thirds of total economic activity, will slow in coming months."

The idea is that Americans are all "spend spend, buy buy " and the US is doomed.  What CBS didn't want us to know is that the total current outstanding consumer credit may be up from last month, but it's $3 billion less than last March and $20 billion less than last Christmas.

This article is a typical CBS hit piece.