credit card, cuttingCredit card use by American consumers plunged for the sixth straight month in July, with total consumer debt falling by $3.6 billion, or 1.75%, the U.S. Federal Reserve announced Wednesday.

A Bloomberg survey had expected total consumer debt to fall by $3.5 billion in July, after a revised $1.0 billion decline in June.

In the past 12 months, total consumer debt has fallen 3.1% to $2.418 trillion from $2.497 trillion in July 2009. That's somewhat less than the 3.3% year-over-year rate of decline recorded in June.

Once again in July, all of the nation's consumer debt reduction occurred in revolving debt, which includes most credit credits. Revolving debt fell by $4.4 billion to $827.8 billion. Non-revolving debt, which includes most auto loans, personal loans, and student loans, increased by $700 million to $1.591 trillion.

Belt-Tightening Weighs On U.S. GDP Growth

July's consumer credit report provided 'more of the same' regarding credit card (revolving) and non-revolving debt. Americans are not only paying-down revolving debt, they are weeding-out frivolous consumption.

A modest-consumption U.S. economy -- should the 'frugal consumer' trend continue -- would represent a structural change for the world's largest economy. In the last decade, consumer spending accounted for 65% to 70% of U.S. gross domestic product. Back then, that metric depended on rising median incomes, an ample supply of credit, and a willingness to spend. Now many of those factors are uncertain: Incomes have been stagnant in many job segments, credit is comparatively tight (with noticeably higher interest rates for credit cards), and consumers remain in the aforementioned 'belt-tightening' mode.

If the above pattern persists, consumer spending could comprise a lower percentage of U.S. GDP and if commercial spending (such as business investments and exports) fails to fill the gap, U.S. GDP will suffer.

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Taina

How much of the reduction was write offs by the banks?

September 09 2010 at 2:22 PM Report abuse rate up rate down Reply
American Patriot

I'm proud to say my wife and I don't own plastic credit cards. We get by and its not easy at times but its a heck of a lot easier than attempting to pay down escalating debt and the associated fees. If more people stopped using them the banks would freak out completely. We have learned to wait patiently for things we need and buy them when we save up for them. There are so many ways to save money everyday but you have to think outside "the box". Good luck everyone and just think about it.

September 09 2010 at 8:07 AM Report abuse rate up rate down Reply
jaytoday856

Check out mint.com (totally free). It has helped me set a goal to get rid of credit card debt.

September 09 2010 at 7:52 AM Report abuse -1 rate up rate down Reply
k4jlp

WHY DO YOU THINK MOST ALL BANKS HANDLE THEIR CREDIT CARD BUSINESS THROUGH SOUTH DAKOTA AND DELAWARE??? IT'S BECAUSE THOSE STATES HAVE NO USURY LAWS....LICENSE TO STEAL...WONDER WHAT THEY ARE GOING TO DO WHEN EVERYONE LIKE ME MOVE ALL MY CREDIT CARDS AND ACCOUNTS TO THE LOCAL CREDIT UNION?? IN THE PROCESS OF DOING JUST THAT NOW..

September 09 2010 at 7:44 AM Report abuse +1 rate up rate down Reply
rutch8

HECK I JUST HAD TO START USING MINE IM OUT OF MONEY THANKS ODUMBO ALL I HAVE IT IS LITTLE CHANGE IN MY POCKET JUST LIKE YOU PROMISED.

September 09 2010 at 7:23 AM Report abuse -2 rate up rate down Reply
Dan and Marie

We are paying off the cards too. When done, will keep the one with lowest interest rate and lowest credit limit for emergency use only (i.e doctor bills, etc) No more using for everyday shopping. Done with the banks.

September 09 2010 at 7:09 AM Report abuse +2 rate up rate down Reply
estein4124

Yes debt is down & if steady cheap energy costs were down consistently & not following the market daily we would see growth again quickly - Donald Trump said it 5 months ago that there would be no market growth with the unjustified energy market & oil between 70 & 80

September 09 2010 at 7:02 AM Report abuse rate up rate down Reply
furio

The Democrat Depression began in October 2007 and then came THE OBAMA! We Capitalist All Vote! NO CONFIDENCE! Fire All Democrats within your companies, they have bad judgements.

September 09 2010 at 7:01 AM Report abuse rate up rate down Reply
1 reply to furio's comment
jkanon

How could it be a Democratic depression with a Republican administration? Fantasy is nice but reality holds all the cards.

September 09 2010 at 7:32 AM Report abuse -1 rate up rate down Reply
ectullis

to bad Obsama isn't

September 09 2010 at 5:23 AM Report abuse rate up rate down Reply
simonetta539

good clients have always had to pay for deadbeats and the fact is there are more deadbeats now and in addition the banks, to forgo having their CEO's compensation looked at under a magnifying glass, paid back the bail out funding they got in record time--these two factors caused the banks to put the squeeze really hard on their best and still able to pay customers. they upped the min payments due, upped the interest rates and if they thought you would have problems dealing with the new reality they were forcing down your throat they then would reduce your credit limits--not very nice. the result is this, they have weeded out their worst customers and wriiten off their losses. the bank balance sheets look good and they are sitting on a pile of money that they refuse to lend even though the fed. reserve loans them money at almost zero percent interest. so I guess the mistake was bailing them out and hoping they would return to doing better banking. it would be better to borrow directly from the government and give up the banking system, they are like the insurance industry to the medical system--leeches taking a very big cut.

September 09 2010 at 5:03 AM Report abuse +5 rate up rate down Reply