Consumers cut household debt in third quarter

In the past few years following the onset of the recent national recession, millions of consumers became more conscious of trying to reduce debt in a number of ways. And now, even as the economy continues to improve in the wake of the economic downturn, many are still continuing those efforts.

The nationwide amount of debt owed by consumers to lenders for everything from credit cards to education loans and mortgages dropped 0.6 percent in the third quarter of the year to a total of $11.66 trillion, according to the latest Quarterly Report on Household Debt and Credit issued by the Federal Reserve Bank of New York. That's down from a total of $11.72 trillion at the end of the second quarter.

A large portion of that decline is attributable to drops in mortgage balances, which fell $114 billion between July and September, the report said. That's down 1.3 percent from the second quarter of the year, but the total amount of non-real estate debt rose by roughly the same proportion to a total of $2.62 trillion.

That change came even as the total amount consumers could potentially carry in credit card debt dipped $25 billion during the third quarter, in part due to the closing of 6 million previously open credit card accounts, the report said. Now, consumers have a total of 383 million credit cards open nationwide, though that total is down about 23 percent from the all-time peak observed in the second quarter of 2008. In addition, the amount owed on those cards is 20 percent below the high set in the fourth quarter of 2008.

But at the same time, consumer demand for new credit cards – when viewed as the amount of new inquiries within a six-month period – rose for the second quarter in a row, the report said. However, the overall delinquency rate across all types of credit rose to about 10 percent as of the end of September, up from the 9.8 percent observed in June.

However, some experts say that lenders have seen delinquency rates rise in recent months more as a result of the all-time lows that have recently been hit being largely unsustainable going forward, rather than a return to riskier borrowing habits by consumers.