Federal Reserve data reported this week showed that consumer debt continues to fall.

The Federal Reserve Consumer Credit report showed that credit card debt fell in October, which is  the 13th consecutive month. Revolving credit, the majority of which is credit card debt, went down at an annual rate of 9.3% over the month. It has dipped $88 billion since October of 2008, or to $888.1 billion from $976.1 billion.

Meanwhile, credit card delinquency rates are also dropping. The delinquency rate, which reflect loans that are 30 days or more past due, was 1.10% in the 3Q09 and is expected to drop to
1.07% by year's end. By December of 2010, TransUnion estimates that 90-day delinquencies will drop to 1.04%.

"The overall decrease of credit card balances is a very good sign for consumers. Perhaps they have taken charge of their credit card and are paying down some of their debt, " says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. "Another factor seems to be they are upset at the very high interest rates and fees that credit card issuers have put on their accounts throughout 2009 and are shying away from using their cards."

The National Retail Federation's 2009 Holiday Consumer Intentions and Actions Survey reported that only 28.3% of holiday shoppers intend to make use of their credit this year compared with 31.5% a year ago, a 10% decrease.

This is further highlighted in a recent USAA survey, which reported more than half (55%) of the respondents are planning to avoid charging their holiday purchases. Among the shoppers who plan to use their credit cards, 74% plan to pay off their balance immediately so that they do not pay interest.

"But credit card issuers themselves may be responsible for much of this drop in revolving credit," Hardekopf said. "Issuers have closed many credit card accounts and have tightened approval rates, making it harder for some consumers with marginal credit to qualify for a credit card. In addition, credit card issuers have cut the credit limits on many customers."

A study by FICO showed that credit card issuers cut limits for a projected 58 million cardholders for the 12 months ended in April 2009. These firms are still cutting limits to limit their risk of lending money. "Right now, consumers aren't consuming and lenders aren't lending like they used to," Hardekopf said.

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