Consumer credit card balances plunge more than $8 billion

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Consumer credit card debt levels plummeted more than $8 billion in September, according to the Federal Reserve’s latest G.19 consumer credit report, marking a 25th straight month of decline. But experts say even a weak economic recovery could soon cause consumers to pull their credit cards from their wallets once again.

In September, consumers’ credit card debt plunged by more than 12 percent — or more than $8 billion. It was the 25th straight monthly decline in consumer credit card balances. The above chart tracks the total decline in credit card debt since balances hit their peak in August of 2008.

For now, however, with the economy still struggling to right itself following the recession, credit card balances keep falling. In September, the revolving debt portion of the Fed’s data[3] — made up almost entirely of credit card balances — plunged 12.1 percent, extending the slide that began in September 2008.

Experts say despite this month’s big drop, as the economic recovery picks up speed, credit card balances could begin to grow. “This is a moderate or half-speed recovery, but a recovery nonetheless,” says Robert A. Dye, senior economist with the PNC Financial Services Group. “I would expect credit indicators to reflect that recovery going forward.”

Economic pressureslinger 
Faced with an economic recession and its aftermath, banks have been extremely cautious about lending that could result in losses and have slashed existing cardholders’ credit limits. Consumers, meanwhile, have also taken steps to survive financially, paying down their balances and avoiding the burden of excess debt. The combined result? Revolving debt levels dropped to $813.9 billion in September from $822.2 billion in August, plunging $159.7 billion from their August 2008 peak of $973.6 billion. That means the ordinary credit cardholder has substantially lower balances. Among families, the average U.S. household with credit card debt — which government data shows totaling about 54 million — has eliminated roughly $2,957 in credit card debt.

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