In August 2012, we saw the largest increase in consumer debt in three months. According to the Federal Reserve, it was $2.73 trillion, which was 5.5 percent above July 2008. The categories that increased were auto, student loans, and credit card; the Federal Reserve report does not include mortgage and home equity loans. The total increase was $18.1 billion, which consisted of $4.2 billion from credit card debt and $13.9 billion in auto and student loans combined. This was due to an increase in college attendance; an increase in buying cars and trucks; and the drop in unemployment to 7.8 percent in September.
In the last four years, Americans have used credit cards less. Credit card debt totaled $1.03 trillion in 2012, which was 17 percent lower than in 2008. Student loan, auto and boat loans were 20.3 percent higher than in July 2008. According to the Federal Reserve Bank of New York, student loans totaled $914 billion in second quarter 2012, which was 50 percent higher than third quarter 2008. Student debt increase was mainly due to high unemployment and more have gone back to school to increase their skills.
According to Equifax, auto lending experienced the highest volume since 2007. In second quarter 2007, there were 10.7 million car loans compared to 11 million in second quarter 2012. More consumers are replacing their 10-year old vehicles which are the oldest ever recorded. Through June 2012, sales of new cars and light trucks increase 15 percent over the same time the prior year. Consumers are buying, smaller, more efficient and cheaper vehicles.
In addition, another report by the Federal Reserve showed that household wealth has gained and is closer to pre-recession levels. This is due to increases in home prices and the stock market. During second quarter 2012, household need worth increased to $62.7 trillion, compared to a low of $51.2 trillion in early 2009, and a high of $67.4 trillion in the fall of 2007 (pre-recession levels). Household wealth or net worth is the difference between assets and liabilities such as mortgages and other loans.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.