As if there was not enough drag in the economy already; the numbers for July are in and showing that consumer borrowing is down along with consumer credit card usage.
Is it bad that consumers are not borrowing?
It is good that Americans are getting themselves into less debt by not borrowing more money, however at the same time, it is a sign that the economy is continuing to remain weak since consumers are not spending.
There was a slight increase in Americans borrowing for auto loans; up 0.6 in July alone, however this is overshadowed by the drop in use of credit cards; falling 6.3 percent in July following a 7.5 decline in June. The good news in this is that it hopefully reflects that more Americans are not turning to credit cards to pay bills.
When is borrowing a good thing?
It is good Americans are becoming more debt-weary, although having some debt is actually a good thing. Why? Showing that you have balances on your credit lines and that you are making payments on time will help to raise your credit score making it easier for you to obtain needed loans at good rates; such as an affordable house loan. Also, it is a good idea to consider a small payday loan if you are going to be a little short and need to make a bill payment; this is because being late on bills can lower your credit score making it tough to get good rates on future loans that can cost you big money in the long run.
Some experts are concerned that if Americans continue to not spend that we will in turn force ourselves back into a double-dip recession; though since unemployment is remaining high, one must ask themselves if borrowing to spend is really the answer.
