Consumer #Credit: Borrowing Spikes Among American Public

Increased consumer spending (and borrowing) could help boost interest in financial institutions’ credit card programs.

Confidence in the economy is now reflected in the amount of outstanding consumer credit. According to a recent report, borrowing reached an all-time high in August at $25.9 billion. This may be good news for lending firms—and credit card issuers.

Much of the increase in consumer borrowing can be attributed to school loans and automobile purchases. Non-revolving debt, which includes auto and school loans, rose by $20.2 billion in August. Revolving debt, mostly credit cards, increased by $5.6 billion during the same time frame. The recent uptick in income growth and steady hiring have also contributed to consumers’ increased borrowing and spending habits.

When consumers go to borrow money, they are faced with numerous options. They might opt for direct deposit loans, payday loans or peer-to-peer lending. Some consumers may even look to credit cards as lending alternatives. 

With credit cards, consumers can make their purchases and pay their balances later. When choosing the credit cards they use, consumers want to see clearly outlined benefits. Financial institutions (FIs) should consider doing the following to gain consumers’ business:

  • Offering competitive APRs – For cardholders classified as revolvers, APRs are especially key. Revolvers carry balances on their credit cards and pay them off over time. 
  • Providing a rewards program – Bonus points, cash back or travel rewards all have the power to make an FI’s card top of wallet. Even consumers turning to their cards as lending alternatives may not be able to resist the lure of rewards.
  • Using data to maximize marketing – Not every marketing effort is a good fit for every consumer. Data analytics can help FIs segment consumers and deliver the right offers at the right time.