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While credit continues to fall, debt consolidation may help avoid a default
By Oscar Monfort on Jul 9th, 2010
Throughout these hard economic times, many consumers have focused on trying to get out of - or avoid altogether - credit card debt, especially as the prospect of unemployment looms.
The Federal Reserve Board reported that May saw that trend continue, as revolving credit fell at an annual rate of 10.5 percent. This, coupled with a 1.4 percent drop in nonrevolving credit, saw the amount consumers have loaned decline 4.5 percent.
May saw credit card debt fall to $830.8 billion from $838.2 billion in April. Overall consumer credit dipped from more than $2.42 trillion to $2.41 trillion between the two months.
Last year saw revolving credit fall 9.6 percent, and the habit of trying to pay off debt seems to be continuing in 2010. However, people should keep in mind that drops in the amount of consumer credit could also mean banks are writing off bad loans.
In order to avoid this scenario, people may consider options that can help them pay off their credit cards. One option is debt consolidation, which might lead to a drop in interest rates.
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