Consumers Forgo Credit Card Debt in Favor of Expensive Car Loans
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Consumers Forgo Credit Card Debt in Favor of Expensive Car Loans

September 25, 2012

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American consumers steered clear of credit card debt in the second quarter of 2012, but reportedly took out new car loans at an alarming pace, according to a recent report from CNN Money.

Sources indicate that credit card balances for consumers dropped to $672 billion, which sounds like a huge sum, but actually represents a total drop of 22 percent from the height of the debt crisis at the end of 2008.

Credit card delinquency rates also dropped by nearly 11 percent when compared to the end of 2008, according to data compiled by the Federal Reserve Bank of New York.

The declining rate of credit card delinquencies and overall credit card debt may help explain why the number of consumers filing for Chapter 7 bankruptcy has declined in recent months.

In contrast to credit card debt, auto loans rose by $13 billion to a total sum of $750 billion across the country. Analysts attributed the dramatic rise in total car loan debt to consumers' post-recession desires to finally purchase new cars, as well as the increasing availability of credit to middle class consumers looking to buy new vehicles.

Sources indicate that the total number of new car sales jumped by 16.3 percent this spring compared to the same three-month period in 2011.

Overall, American consumers saw their total household debt drop by $53 million to $11.28 trillion. And since the peak of the debt crisis in the fall of 2008, American families have shed $1.3 trillion in debt.

Other positive economic news includes a half percent drop in total mortgage debt and dip in the overall balances of home equity lines of credit, but sources do warn that rising levels of student loan debt could outweigh the other debt figures.


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