According to monthly data from the Federal Reserve, consumers sharply reduced their credit card balances in December.
Revolving credit, a category of loans made up almost entirely of credit card debt, showed a 7.8 percent decline in December, according to the G.19 report. Earlier, the Fed had reported that revolving credit fallen in November 2008 at an annualized rate of 3.4 percent. On the other hand, that number was changed sharply lower in the current report to 8.5 percent. The changed in November decline was the largest ever recorded in terms of dollar amount and was the steepest percentage fall since January 1978. Overall, revolving debt fell to $963.5 billion from a total of $969.9 billion in November.
In the mean time nonrevolving credit fell 0.2 percent in December. In this section of the consumer credit report includes a variety of types of lending, primarily auto loans, student loans and loans for mobile homes, boats and trailers. Lending for new cars shows dramatic change: Average interest rates have shot up from 6.4 percent in October to 8.4 percent in December, and the average length of loans fell below 60 months for the first time in years. The auto lenders and credit card issuers are both signs, are pulling back on making loans.