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Featured Advisor

Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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Borrowing Is on the Rise

Borrowing is up, but credit card use is down. What's up with that?

| BY Adriana Reyneri

Overall borrowing is on the rise in the United States, even as American consumers pare down their credit card debt, according to a Federal Reserve Consumer Credit report released today.

Total consumer credit increased $7.4 billion, rising at an annual rate of 3.5 percent  in the month of September, but a 1 percent drop in credit card borrowing offset a 5.8 percent gain in non-revolving debt including car and student loans. A lack of consumer confidence stemming from an uncertain job market is keeping consumers from piling on credit card debt, say analysts. A government report released last week puts the official unemployment rate at 9 percent. The number is likely to remain high due to a frustratingly slow economic recovery, said Federal Reserve Chair Ben Bernanke in public comments last week.

Investors surveyed by Millionaire Corner in March say the most important lesson learned during the prolonged economic downturn is to avoid borrowing and taking on more debt. More than half of the Mass Affluent investors, those with investable assets of $100,000 to $1 million not including their home, say the economic downturn has taught them not to take on as much debt in the future. Nearly 40 percent of these investors, who largely represent the baby boomer generation, say they will now worker longer than originally planned due to the recession, and 44 percent say they’ve also learned that their home is not a stable financial asset.

 The Mass Affluent investors say they are cutting back on borrowing largely due to fears about running out of money in retirement. Nearly 30 percent say their household needs to save more to meet their financial goals, while 35 percent say they have reduced their debt and 17 percent say they have saved more in safe cash accounts.

Consumer spent 2.5 percent in the third quarter of the year, even though income remained flat, by cutting back on saving. Some analysts take the increase as a sign the economy is strengthening, but others fear the spending is not sustainable.