[credit provider=”Orin Zebest on flickr”]
The total of all consumer debt has been steadily decreasing over the past two years; prior to the last quarter, it was down 8.2 per cent from its peak in 2008.A new report released by the Federal Reserve indicates that the trend is reversing itself. U.S. household debt rose by .3% in the first quarter of 2011.
According to the Fed, rates on delinquencies, foreclosures and bankruptcies are slowly improving. Consumer debt, which includes mortgages, credit cards and student loans, is still lower than it was at its highest point in the third quarter of 2008 and is 15% less than a year ago.
It is still unclear whether or not consumers are paying their debts on charge offs that occurred because of defaults, according to the Fed’s data. The amount of charge-offs totaled $822 billion of household debt from mid-2008 to the end of 2010
Unfortunately, debt has become a way of life for most Americans. In the last two years, US households have been able to accrue $658 billion in mortgage and credit card debts. In the mid-2000s, consumer debts exceeded the $10 trillion mark.
According to the Fed, credit card limits increased at the beginning of this year to about $30 billion, but have still dropped from their mid-2008 levels. The number of open credit accounts is 24 per cent less than its 2008 peak. Since the end of 2008, balances are 20% lower. At a national level, foreclosures have dropped; approximately 368,000 foreclosures were added to credit reports in the first quarter.
Followed by an improvement on revolving and credit card lines, consumers’ borrowing improved for 6 consecutive months in March. As a result, banks are more optimistic and are loosening their policies on lending terms.
The effects of these more lax terms will likely to continue the increase in consumer debt; whether Americans learned anything from the recent economic downturn in terms of borrowing conservatively remains to be seen.