Bills.com Urges Consumers to Repay Debt Before Interest Rates Climb Higher
SAN MATEO, Calif. (PRWEB) November 13, 2018 -- Consumers are borrowing less on credit cards, and more for motor vehicles and education, according to the latest figures from the Federal Reserve. But as interest rates rise, so do concerns about consumers’ overall levels of increasing debt.
“Non-revolving debt is accumulating at more than three times the level of revolving debt – a statistic that casts a worrisome look into consumer borrowing,” says Daniel Cohen, managing editor of Bills.com, a resource providing simple tips, advice and tools to help consumers make smart financial decisions. “High levels of debt for any reason are concerning, especially heading into the holiday season.”
The Federal Reserve announced that during the third quarter of 2018, total outstanding consumer credit rose by 5.25 percent compared to the same period last year. Staying with the trend that has dominated the last several years, revolving credit increased by 2 percent, while nonrevolving credit grew faster, by 6.5 percent. Revolving credit includes credit card accounts. Nonrevolving debt includes outstanding credit for items such as vehicles, education and unsecured installment loans. The consumer debt data does not include home loans or home equity borrowing.
The dollar amount of nonrevolving credit month-to-month growth in September, the most recent month available, grew by $11.2 billion, to a total of $2.9 trillion. That includes a total of $1.6 trillion in student loans and $1.1 trillion in motor vehicle loans. By contrast, revolving credit – primarily credit card accounts – decreased by $300 billion in September, to just over $1 trillion. During 2018, revolving credit has declined five out of nine months, but at the same time, nonrevolving credit has increased every month, by an average of $11.8 billion per month.
The decrease in revolving debt may be an indication that borrowers are using credit cards more cautiously as interest rates increase, says Cohen. A November report found that average credit card interest rates have reached an all-time average high of 17.14 percent. Rates have increased in the wake of the Federal Reserve’s hikes on its key federal funds rate, including a 0.25 percent increase in September. That rate increase was the third this year, and observers have noted that more Fed interest-rate increases are likely to come as soon as December.
“It’s great if consumers are learning to manage their credit card debt better, but we’re concerned that people may instead be shifting their debt, particularly to motor vehicle loans. High levels of student loan debt could also be a concern, as is refinancing debt using home equity, which isn’t reflected in this report,” says Cohen. “As interest rates increase, the cost of borrowing increases. It is critical for people to pay off their debt – whether credit card, vehicle or other – now, or get help if they’re unable to repay what they owe.”
Bills.com (http://www.bills.com)
Bills.com is part of the Freedom Financial Network, a family of companies whose products and services provide innovative solutions that empower people to live healthier financial lives. The Bills.com resource site provides simple tips, advice and tools – including the Bills.com debt relief calculator – to help consumers make smart financial decisions.
Headquartered in San Mateo, California, Freedom Financial Network also operates an office in Tempe, Arizona, and employs more than 2,200. The company has been voted one of the best places to work in both the San Francisco Bay area and the Phoenix area for several years.
Aimee Bennett, Fagan Business Communications, 3038439840, [email protected]
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