WASHINGTON (AP) — Consumers revved up their borrowing in April, with growth in credit card debt accelerating at the fastest pace in more than a dozen years.
Overall credit expanded by $26.8 billion during the month, up from an increase of $19.5 billion in March, the Federal Reserve said Friday. The sizable climb is an encouraging sign for the economy, suggesting that consumers are confident enough to boost purchases by borrowing.
The result was fueled by autos and student loans, which rose by $18 billion, and credit card debt, which was up $8.8 billion. The upswing in credit card debt represented a 12.3 percent gain, the fastest pace since November 2001 when consumers were being urged to spend to bolster the economy following the September 11 terrorist attacks.
The April increase continued a string of robust monthly gains and pushed total borrowing to a record high of $3.18 trillion.
Increased household borrowing can drive stronger consumer spending, which accounts for 70 percent of economic activity in the U.S.
Alan Levenson, chief economist at investment firm T. Rowe Price, said that the momentum is likely to continue in coming months, helped by rising employment and steady income growth that will make people more willing to take on debt.
The rise in credit card balances in April was surprising given recent trends. Credit card use plunged during the recession when consumers tried to lower their debt as millions of people lost their jobs.
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