U.S. consumers are tapping into credit this year in a big way, mostly to pay for vehicles or education.
The Federal Reserve's monthly report shows consumer credit rose by $6.51 billion in April, the eighth month in a row that it has risen. It follows a $12.4 billion gain in March.
The gain in non-revolving credit – which covers car payments and student loans, recorded its biggest advance in the last three months.
Overall credit rose despite the fact that consumers put less money on their credit cards. Revolving debt – and credit cards make up the biggest segment of that – fell by $3.44 billion.
While the economy needs consumers to spend – and credit card debt is usually a sign of spending – rising credit card balances are not necessarily a good thing for the long term. The latest report suggests consumers are working at paying down balances and are exercising greater discipline in using their plastic.
The rise in student loan debt might be a troubling sign, as the Consumer Financial Protection Bureau (CFPB) earlier this year warned total student loan debt in the U.S. now exceeds $1 trillion. The CFPB expressed the concern this level of debt might not be manageable in a tight job market where debt-burdened graduates have difficulty finding employment.
In issuing its “beige book” this week, the Fed noted that credit appears to be expanding, with lenders making more money available to creditworthy customers. It also reported that the economy appears to be expanding at a “moderate” pace.