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While drop in consumer credit may indicate write offs, debt management plan can help avoid default
By Angela Hawke on Apr 8th, 2010
Perhaps in an effort by people to become more financial stable, consumer credit declined in February, according to a report from the Federal Reserve Board.
The Fed said consumer credit declined at an annual rate of 5.6 percent during the month, which is a preliminary calculation. This compares to a revised number for January, which saw consumer credit increase 5.2 percent.
The largest percentage drop was seen in revolving consumer credit, which decreased at an annual rate of 13.1 percent. The majority of revolving credit is made up of credit card debt, and a decline could indicate that consumers are trying to pay off what they owe.
However, it could also mean that banks and lenders had to write off debts as being uncollectable because account holders were not been able to get a handle their credit cards.
Consumers who find themselves in this situation do have alternatives to defaulting on their credit card accounts. For example, they may consider a debt management plan, which can lower the amount of interest they pay on all of their credit cards.
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