Credit card users let up

WASHINGTON — Americans borrowed less for an 11th consecutive month in December, paying off credit cards while increasing borrowing for cars and other products.
The mixed picture raises hopes that Americans may soon return to spending, a necessary condition for economic recovery.

But the record 11-month decrease in overall borrowing shows consumers are still holding back amid lingering economic uncertainty and 9.7 percent unemployment.

The Federal Reserve said Friday that total borrowing dropped by $1.8 billion — far less than the revised $21.8 billion decline in November. It also was well below the $9 billion expected by analysts surveyed by Thomson Reuters.

Savings are less of concern

While economists have worried for years about the low rate of U.S. savings, the concern now is that consumers could derail the recovery if they start saving too much of their incomes. Consumer spending accounts for 70 percent of total economic activity. Borrowing on credit cards fell by $8.5 billion; other types of loans increased by $6.8 billion.

That means consumers are more willing to take out loans for big-ticket items like cars, boats or education. But they may not be using credit cards to augment their income as freely as in the past.

The change also may reflect card issuers' scrambling to raise rates and cut lines before tough consumer protection rules take effect next month, with card issuers limited in how quickly they can raise rates. They have responded with a flurry of rate hikes and other provisions that make it more costly for consumers to carry balances on their cards.

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