Consumers appear to be more willing to add to their credit card balances lately, and banks appear willing to let them do it.
After two years in which credit card companies reduced credit limits and closed some accounts entirely, the amount of consumer credit debt is rising once again. The Federal Reserve reports consumer credit rose in December.
While holiday spending undoubtedly had something to do with that, it wasn't the only reason. The rise in consumer debt in December was the third straight month of increases, signaling consumers may be more comfortable spending again.
A $6.1 billion increase
According to the Fed's repot, credit rose by $6.1 billion, reaching a total of $2.41 trillion. While that's definitely a lot of money, it remains below the high point of consumer debt -- $2.58 trillion -- reached in July 2008.
Economists see the rise in consumer credit -- especially the three month trend -- as a hopeful sign for economic recovery. With the jobless rate at 9.0 percent, businesses aren't likely to begin hiring in strong numbers until they see signs the consumer is spending once again.
There are, of course, risks to consumers who begin to add to their debt, especially credit card debt. Debt is essentially borrowing from future earnings, and if earnings aren't going up, it creates a squeeze at some point.
Economist Joel Naroff, of Naroff Economic Advisors in Holland, Pa., recently noted the drop in the unemployment rate was good news for the economy, but obstacles to growth remain.
"The one remaining huge problem is wages: they are stagnant," Naroff said. "While that may be helping grow profits, it is not doing a whole lot to raise income and spending."
Beyond that, household consumption is being challenged by rising energy and other costs and without larger wage increases, the likelihood of robust growth is reduced.
The Center for Responsible Lending also sees that as a danger if consumers return to heavy credit card use.
"A combination of job instability, shaky benefits, and uncertain retirement, has unraveled the worker's safety net," the group says. "Credit card issuers step in to the breach, as Americans reach for their credit card to borrow for basic living expenses."
If consumers are using their credit cards to purchase discretionary items, that may indeed help spur the economy. If rises in credit are to meet every day basic needs, economists say, that's something else entirely.