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The Federal Reserve reported on Monday that consumer credit card balances rose in December for the first time in over two years. Since the credit crisis hit the U.S. in the fall of 2008, balances on credit cards have been dwindling. Americans have been hesitant about spending money while not knowing if they will lose their jobs, and others have been forced to reevaluate their spending habits after getting laid off. Unemployment is still low, and Americans continue to worry that their financial situations will only get worse.

However, the 2010 holiday season surprised retailers as many saw an increase in sales for the year. The Federal Reserve confirmed on Monday that more Americans did spend money in December as they finally saw an increase in credit card debt since August 2008. Although the boost in spending did help the economy in the fourth quarter of 2010, it is still too early to determine if the spending will have any long-term effects on our economy.

According to the Federal Reserve, outstanding credit card debt had an ending balance of $800.5 billion on Dec. 31, which was $2.3 billion higher since the end of November. Although debt is still down 18% percent since August 2008, the increase in December suggests that consumers may be feeling more confident about their financial situations or the status of the economy. The increase may also suggest more people are starting up businesses and using their credit cards to fund their new ventures.

But with the increase in foreclosures and bankruptcy filings during 2010, the rise in credit card balances could also mean more bad news for the U.S. economy. Some suggest that more Americans are relying on their credit cards to cover their daily and monthly living expenses. Many consumers are still struggling financially, and they may feel desperate to use their credit cards in order to make ends meet.


Los Angeles Times: “Credit card debt rises for the first time in two years,” Tom Petruno, 7 Feb. 2011