Americans Padlock Credit Cards in Run-Up to Holidays

08 February 2002

In a report published yesterday by the Federal Reserve, consumer credit card debt and other revolving loans plummeted $8.1 billion in December – the largest fall yet recorded in a single month.

Economists’ best guess is that citizens’ credit cards remained in their wallets as they paid in folding money or wrote checks, thanks to the windfall federal tax rebate. Opined Kurt Karl, chief US economist at Swiss Re: “For many consumers, $600 [the average rebate for married couples] is their entire holiday budget. If all those consumers didn’t run up their $600 in debt, boom: big drop!”

According to the Fed, aggregated borrowing by US consumers slid $5.1 billion in December to a seasonally adjusted $1.645 trillion. This follows November’s revised $20.1 billion leap to $1.65 trillion – the largest monthly rise since the Fed reports began in 1943.

On the jobs front, the US Labor Department notified that the number of workers filing first-time applications for unemployment benefits fell by 15,000 last week, suggesting an improvement in the employment sector. Initial jobless claims also fell in the week ended February 2 to 376,000

The department also noted that the four-week moving average, considered a more accurate gauge of labor-market trends, fell by 5,750 to 380,500, its lowest level since August 18.

Other recent economic reports also indicate a standstill in the previously uninterrupted downward trend of the economy.

Data sourced from: Wall Street Journal; additional content by WARC staff