U.S. consumers have about $11.4 trillion in personal debt, a total that is down more than 8 percent from the $12.5 trillion peak seen in 2008, according to data from the New York Federal Reserve. Mortgages, usually personal investments in housing, have consistently made up about 75 percent of that debt.
Credit cards and home equity lines of credit are voluntary debt, and consumers have been paying these loans off. Balances on credit cards have fallen by 20 percent in the past three years and home equity loans have seen a decline of 11 percent.
As balances have dropped, consumers have also reduced in the amount of credit they have available. Credit card limits total about $2.7 trillion, down from nearly $4 trillion less than three years ago. Outstanding balances represent only about 25 percent of available credit.
Consumers have closed 83 million credit card accounts over that time. Some accounts were closed due to bankruptcy and written off as bad loans by banks. But the outstanding balances relative to available credit have remained fairly constant, supporting the idea that most of the decline in credit use has been voluntary.
Home equity lines of credit show a similar trend, with available credit declining along with balances. Only 55 percent of available credit is currently outstanding on these loans.
Student loans are the only credit category showing a sustained increase. The value of a college education may be questionable to some, but with unemployment at high levels the investment seems necessary to a growing number of Americans.
For weeks, Washington focused on raising the debt limit and the only real question was how much spending could exceed income for the federal government. Meanwhile, American families have been living within their means and largely limiting borrowing to investments in housing and education.
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