Ka-ching! Consumers borrow mostly on credit cards

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WASHINGTON Consumers boosted their borrowing in May, mostly reflecting heavy credit card use to finance their purchases.

The Federal Reserve reported Tuesday that consumer credit increased at an annual rate of 3.6 percent in May, roughly the same pace as logged in the prior month. The pickup pushed total consumer debt up by $7.8 billion to $2.57 trillion. That was a bit more brisk than the $7 billion over-the-month increase economists were expecting. The increase was led by much stronger demand for a category called revolving credit, which is primarily credit cards. Use of revolving credit rose at a 7.1 percent pace in May. That compared with a cutback in such credit of 0.5 percent in April. Still, the longer-term trend shows that consumers have been forced to charge more of their purchases on credit cards as banks have tightened lending standards on other types of loans. Demand for non-revolving credit used to finance cars, vacations, education and other things, meanwhile, slowed to a pace of 1.6 percent in May. That was down from a growth rate of 6.1 percent in April and was the slowest since December. The Fed’s measure of consumer borrowing does not include any debt secured by real estate, such as mortgage or home equity loans. (AP) ______ Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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