U.S. Consumer Credit Rose By $5 Billion In May, Marking New Realities for Consumers in Debt

According to last week’s Federal Reserve report, U.S. consumer credit rose by another $5.08 billion in May--a figure that suggested a willingness for millions to keep borrowing despite an exceptionally tight job market.

In a recap of these new figures by Reuters, the news agency said, “The May rise, coming after a revised $5.67 billion increase in April, handily topped forecasts by Wall Street economists for a $4 billion increase and marked the eighth straight month of growth in consumer credit. The total of all consumer credit outstanding in May was $2.432 trillion, up from a total of $2.427 trillion in April. The key change in May came in a category called "revolving credit," principally credit-card debt, that shot up by $3.36 billion in May after declining by $876.7 million in April. That was the biggest increase in credit-card debt for any month since mid-2008, when the economy was in the midst of the 2007-2009 financial crisis.”

While the experts at the Fed didn’t shed much light on the reasons behind this big monthly shift in consumer debt, this uptick in more credit card use could reveal a return to pre-recessionary buying sentiments during which many people who had foregone luxury buys during our weakened economy are now feeling more confident about filling their carts with items that are less about “need,” and more about “want.”

Another possibility, according to Reuters, is that average consumers, facing fewer job prospects in recent months were forced to turn to credit cards and other consumer debts more often just to pay basic bills.

“For a lengthy period from late 2008 until recently, consumers had been paying down credit-card debt on a fairly regular basis,” wrote Glenn Somerville at Reuters. “Analysts said that trend, which effectively meant debt loads were easing, was healthy because it should put consumers in a better position in future to resume spending and thus add to economic growth. A category called "nonrevolving credit," which includes such items as student loans and car loans, expanded by $1.7 billion in May after shooting up by $6.54 billion in April.”

This is not a good sign for a healthy number of unemployed and underemployed Americans struggling to stay current with basic bills, much les high interest consumer expenses.

If the old methods of eliminating expenses or increasing income aren’t working to help you personally combat credit card damage, it may be time to consider a personal bankruptcy. So, if you find yourself in a situation where you can’t cover your credit card debt or other consumer loans after paying for the your secured bills, consider a Chapter 7 bankruptcy, which allows you to get rid of your unsecured debt, providing a safe period to save for higher priority expenses such as your home, car, retirement, savings and child support.

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