10
Dec

Though Americans have generally been more conscientious in dealing with their debt — of all types — since the end of the recession, there has been a trend in recent months toward increasing balances, and that continued in October as well.

The amount of money owed in the U.S. across all types of loans and lines of credit excluding mortgages increased significantly in the month of October after a much smaller jump in September, according to the latest report on consumer credit issued monthly by the Federal Reserve Board. In all, borrowing grew 6.2 percent on an annual basis to a total of more than $2.75 trillion, up from the less than $2.74 trillion seen the month before. However, on an year-over-year basis, that was up from slightly less than $2.6 trillion.

How the changes stack up
It should be noted that the amount of money owed on both revolving and nonrevolving credit accounts jumped significantly in October, after those for non-mortgage installment loans slipped on an annual basis the month before, the report said. The larger increase came in credit card balances, which are considered revolving debt.

In all, debt on this type of account increased to $857.6 billion in October, up from $854.2 billion in September and a 4.7 percent increase from the nearly $848.7 billion in the same month last year, the report said. Credit card borrowing has increased slowly, fluctuating up and down from one month to the next, since more or less the beginning of 2011. However, it is still down significantly from the all-time peak of nearly $1.03 trillion observed in July 2008.

Meanwhile, nonrevolving credit, which is defined as all installment loans not including mortgages, but generally made up of auto and student financing, ticked up to a new all-time high again, as it has done for most months this year, the report said. The total amount owed on these lines of credit rose to nearly $1.9 trillion, up slightly from the $1.89 trillion seen the month before, but a significant increase from the less than $1.75 trillion seen in October 2011. The annual growth was 6.9 percent, but that was massive compared with the 3.1 percent year-over-year decline observed in September, which put this type of borrowing down 0.6 percent for the entire third quarter.

More federal education loan borrowing
Much of the increase in nonrevolving debt came, as it so often does these days, in the form of more student and other education loan borrowing from the federal government, the report said. The amount owed on these loans rose to $516.4 billion in October, up from the $509.5 billion in September and $495.7 billion in August. That's also up considerably from the total seen in October 2011, which was just $402.2 billion.

Borrowing costs remain a mixed bag
Meanwhile, in the month of August (the most recent time for which data was available), the cost of borrowing on either credit cards or some types of nonrevolving credit continued to change, the report said. For instance, on credit cards, the average interest rates for all accounts slipped to 11.95 percent, from the 12.06 percent observed at the end of the second quarter. But at the same time, the rates charged to accounts actually assessed interest payments increased to 13.22 percent from 12.76 percent.

Further, interest charges on 48-month new car loans held steady at 4.88 percent from the second quarter to August, the report said. However, that was also down from the 5.07 percent seen at the end of the first quarter, which in turn shows lenders may be relaxing their standards. There was also a decline in 24-month personal loan interest rates, which fell to 10.37 percent from the second quarter's 10.94 percent.

In general, all the changes may indicate that consumers are feeling better about their personal financial situations these days, and are now increasing their borrowing efforts to finance various things in their lives that they may have eschewed in the past few years. And with interest rates generally shrinking or holding steady overall, that might encourage more people to begin borrowing again as well.

However, it's also important for consumers to keep close tabs on their credit standing during these times, because having a diminished rating for any reason can make it far more difficult to qualify for the various lines of credit they may want. For this reason, it might be a good idea for borrowers to order copies of their credit reports and check them over closely for any unfair markings that may be marring their standings. If any are discovered, it can be wise to work with a credit repair firm, which may be able to help to correct these entries.