This blog recently discussed how the cost of credit card fees was on the decline, but recent numbers also show that American consumers are using plastic for fewer and fewer purchases. Even without the federal shutdown, the past few months have showed that Americans are still quite cautious with their spending as the economy works its way back to full strength.
Both situations prove the importance of strong lender software, as banks need to remain current on consumer habits to keep themselves financially stable.
According to a Monday report from the Federal Reserve, credit card debt dropped $883 million to roughly $850 billion. However, consumers also increased their borrowing $13.6 billion in August to a seasonally adjusted $3.04 trillion.
The Associated Press explained that the decline in credit card debt could be a major drive in lower consumer spending, as 70 percent of economic growth comes from that area.
"Slow but steady job growth and small wage gains have made many Americans more reluctant to charge goods and services," the news source explained. "Consumers may also be hesitant to take on high-interest debt because they are paying higher Social Security taxes this year."
The AP added that while the Fed is beginning to separate auto and student loans from this data, the latest information in those areas is two months behind this most recent report. Even so, student loans totaled $1.18 billion in June while auto loans totaled $841 million.
Financial institutions need to keep themselves informed on consumer spending habits, as these will likely affect how creditworthy some borrowers are. Having current loan application software in place is critical for organizations to make sound decisions during the lending process.
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