Consumers’ total outstanding credit leapt by $19.5 billion in January.
Revolving credit accounted for $8.4 billion of the increase, while nonrevolving credit made up the other $11.1 billion, the Federal Reserve said Thursday (March 7) in its monthly report on consumer credit outstanding.
“In January, consumer credit increased at a seasonally adjusted annual rate of 4.7 percent,” the Federal Reserve said in the report. “Revolving credit increased at an annual rate of 7.6 percent, while nonrevolving credit increased at an annual rate of 3.6 percent.”
With these increases, total outstanding credit reached $5.04 trillion, according to the report.
The leap in consumer borrowing was higher than that forecast by economists, Bloomberg reported Thursday. The median estimate of economists surveyed by the media outlet was for an increase of $10 billion.
The increase in nonrevolving credit was the highest in seven months, and the total credit outstanding in January was the highest ever, according to the report.
Among the factors contributing to the rise are a resilient labor market that has continued to support consumer spending, shoppers’ increasing use of credit cards for their purchases and higher interest rates that have boosted the amount of non-mortgage interest rate payments made by consumers, the report said.
The Federal Reserve Bank of New York’s Center for Microeconomic Data reported in February that consumers are feeling optimistic about their access to credit. In a survey, it found that more consumers are reporting that it is now easier to access credit than it was a year ago.
PYMNTS Intelligence has found that when consumers’ savings are limited, many turn to credit to counter financial emergencies.
When faced with unexpected expenses costing less than $1,000, 21% of all consumers used credit cards to pay the bill, according to “The Credit Accessibility Series: Unexpected Expenses and the Demand for External Financing Solutions,” a PYMNTS Intelligence and Sezzle collaboration.
The report also found that even when respondents had small cash reserves on hand, many chose to pay for smaller emergencies with credit. Credit was the go-to solution for 38% of consumers with savings balances of less than $5,000 and for 28% of those who had no savings.
