With a failed stimulus package now looking all but certain, the nagging question remains about how consumers are going to keep up their spending activity. Employed consumers have their ongoing paychecks, but what about the millions who are unemployed, and the rest of the Americans who have dropped out of the workforce in 2020?
Consumers seem to keep find a way to spend on the items they cannot live without. The easy way to know this is because the nation has savings, and even those who are unemployed still often have access to credit cards and other credit. The Federal Reserve has reported its consumer credit data for August. As the stimulus ran out, Americans used their credit a bit less than expected.
The Fed’s report indicated that the total outstanding consumer debt decreased by 2.1%, or a drop of $7.2 billion, to $4.144 trillion in August. While expectations were calling for a gain in August, the increase in July’s consumer credit was revised to $14.7 billion from a preliminary $12.3 billion gain.
Revolving credit decreased at an annual rate of 11.25% and nonrevolving credit increased by 0.75%. That put all the drop on credit card debt under the revolving credit category, and that now makes for six months of declining credit card debt. After the lockdowns were lifted, consumer debt had risen for three consecutive months.
While this was an unexpected decrease, overall consumer credit is still close to the all-time highs of about $4.2 trillion seen in February of 2020.
Another issue in this consumer credit report was that the average rate on a credit card was 14.58% on all accounts, up from 14.52% in the second quarter but down from 15.09% in the first quarter. The assessed interest rate was higher at 16.43%, up from 15.78% in the second quarter but down from 16.61% in the first quarter.
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