Fact Checked

Total consumer debt rose in August but credit card balances fell, Fed data shows

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U.S. consumers’ total outstanding debt rose from July to August. Total nonrevolving debt rose by almost $20 billion from July to August, while revolving debt balances — which includes credit cards — fell by $2 billion, according to a monthly Fed report.

Revolving debt refers to lines of credit, such as credit cards and home equity lines of credit. Nonrevolving debt includes loans such as student loans and auto loans. Total consumer debt includes both revolving and nonrevolving debt.

So what’s the big deal with consumer debt? This fresh data on consumer debt adds to the mixed signals we’ve been seeing about the U.S. economy this year.

For example, Americans are saving more, which may not be great for economic growth. However, the Federal Reserve cut interest rates twice last summer, which could encourage people to take out auto loans or mortgages.

Read on to learn more.

Want to know more?

What’s going on with consumer debt?

Consumer debt can be broadly broken down into revolving loans and nonrevolving loans. Although people may have both types of debt, nonrevolving debt tends to be more stable over time because it comes with a fixed timeline to repay. But revolving debt, which can vary every month, is made up of the balances you carry on any revolving credit lines you have open.

As the chart below shows, it’s pretty common to see large swings in revolving debt from one month to the next.

So it’s not necessarily a big deal that revolving debts are lower and nonrevolving debts are steadily growing. The bigger issue is that rising debt could cause financial institutions to tighten their lending standards.

In fact, Federal Reserve survey data among senior bank loan officers from earlier this year indicated that some banks were doing just that — maintaining their lending standards for nonrevolving loans while making it tougher to get approved for credit cards.

What’s next?

In the short term, you’re not likely to see any changes to financial policy or to loan terms. But banks and the Federal Reserve may be paying close attention to this data, so it could affect their decisions.

If you want to keep up with what the Fed is doing, you can follow its meeting calendar and statement releases.