Outstanding loans on credit cards fell 1.9% last year

June 11, 1993|By American Banker

NEW YORK -- For the first time since 1981, commercial banks' credit card loans shrank last year as recession-weary consumers moved to reduce their debt burdens.

Total card loans outstanding fell by 1.9 percent, to $136.4 billion, according to American Banker's annual survey of consumer lending.

jTC Meanwhile, banks' total consumer loans, including mortgages, grew by 3.2 percent, to $849.3 billion. The growth rate was up from the 2.4 percent of 1991 but was still meager compared with the double-digit increases of the 1980s, which made the loans the major contributor to bank profitability.

The 1992 data showed mortgage loans grew by 8.2 percent, to $390.1 billion, and home equity loans rose 4.3 percent, to $73.3 billion.

But even those growth figures reflected consumer frugality. Bankers report that many customers were refinancing their homes and using the proceeds to pay down more expensive loans, or using home equity loans -- with their tax-deductible interest -- to replace other borrowing.

"In 1992, the consumer market was just about flat," said Donald W. Grigley, executive vice president at Shawmut National Corp., which sold its credit card business in 1991. The people who are spending money, he said, are generally drawing on lower-cost lines secured by homes.

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