Energy Efficiency

BOSTON (MarketWatch) — There’s a dark reality looming beneath the surface of some seemingly good news released Monday about consumer credit. Americans increased their outstanding debt in February, but at nearly half the rate of the previous month, which had some experts suggesting that the news was positive because consumers were tightening their belts.

Dig a little deeper, however, and a starker picture begins to form.

The Federal Reserve said that consumer borrowing in February was up by $5.2 billion, or 2.4%, bringing total consumer credit to $2.5 trillion. Most economists forecasting the issue had expected consumer credit to jump by more than 5%.

The problem is that the overwhelming bulk of the expansion came from credit-card debt, which jumped at an annualized rate of almost 6%. That amounted to $4.7 billion of the additional debt taken on by consumers during the month.

While the Fed doesn’t explain why this is, there’s a likely conclusion to be made, particularly since other forms of credit — student and auto loans, for example — have seen rates falling since February. Specifically, experts are wondering whether more consumers are using credit cards to finance their lives, since they may not be able to qualify for the cheaper forms of debt.

That’s nothing to cheer about. If the trend continues — and people have to move more of their debt to revolving accounts instead of the steadier, lower-cost big-dollar loans — America’s consumer credit crisis will get a lot worse, even if the overall numbers don’t say so. source