After a one-month respite, Americans went back to cutting their credit-card balances in February with a vengeance.
They reduced their revolving credit at an annual rate of 9.7 percent, the Federal Reserve reported Tuesday. Revolving credit includes credit- and charge-card borrowing. That's the fourth monthly decline in the last five and the sharpest one-month drop since January 1978.
February's drop in credit-card debt comes in a much different environment than the one that existed 30 years ago. Then, the Federal Reserve was fighting inflation and boosting interest rates, which made it expensive for Americans to carry a balance on their credit cards. In the first month of 1978, they slashed credit-card debt at an annual rate of 15.7 percent.
Today, the Fed is fighting deflation and has cut interest rates to nearly zero. But consumers have decided to retrench their credit-card spending anyway, worried about their jobs and the deep recession.
Deals on a car loan
The only increase in February was in nonrevolving credit, which includes loans for cars, mobile homes, boats, and education. That borrowing edged up at an annual rate of 0.25 percent.
The increase may have been fueled by auto loans, which saw interest rates plunge for new cars from 8.2 percent in January to 3.2 percent in February. The Federal Reserve has begun a concerted effort to reduce interest rates and rev up the pace of consumer loans by offering lenders low-cost financing.