After 4 years of frugality, Americans whip out credit cards

Debt levels grew in American in the fourth quarter. Illustration RD Varnon

The Federal Reserve Bank of New York said consumers ended 16 quarters of deleveraging in the fourth quarter as outstanding household debt in America climbed to $11.34 trillion.

The NYFED said mortgage debt was virtually flat in the fourth quarter but non housing debt from credit cards, auto and student loans all increased in the last quarter of 2012.

“The data provides early evidence that consumers may be reaching the end of the four year deleveraging cycle, though we’ll need to see if this is sustained in upcoming quarters,” said Andrew Haughwout, vice president and economist at the New York Fed. “At the same time, we observed mixed developments, mortgage originations increased and fewer accounts entered the foreclosure pipeline but delinquency rates remain considerably higher than pre-crisis levels.”

Total outstanding debt in the nation has fallen from its high of $12.68 trillion in the third quarter of 2008. The NYFED said Americans have reduced debt levels every quarter since the fourth quarter of 2008 until the end of 2012.

With many Americans going years without pay increases that have kept rate with rising costs, some have had to turn to credit cards and other loans for many every day expenses. Others, who have trimmed debt, now feel more comfortable taking new obligations on.

American households added $15 billion in auto loans, $10 billion in student loans and $5 billion in credit card debt during the quarter. Auto loans, at $783 billion are their highest levels in nearly four years.

Outstanding student loan debt now stands at $966 billion. The percent of student loan balances 90 or more days delinquent increased again and currently stands at 11.7 percent.


  • 8.6 percent of total debt was in some stage of delinquency compared with 8.9 percent the previous quarter.
  • Delinquency rates for mortgages improved to 5.6 percent from 5.9 percent the previous quarter.
  • Delinquency rates for home equity lines of credit, which stood at 4.9 percent in the rhitd quarter, dropped to 3.5 percent – a decline primarily reflecting higher charge-offs of delinquent HELOCs this quarter.
  • About 210,000 individuals had a new foreclosure notation added to their credit report, a quarterly slowdown of 13.3 percent, continuing a downward trend.
Rob Varnon