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Consumer credit card balances declined in January, according to the latest Federal Reserve data, resuming their fall after posting one month of gains at the end of 2010.

On Monday, the Fed reported that credit card balances once again fell in January. The Fed’s monthly G.19 report on consumer credit showed that revolving debt — primarily composed of credit card balances — dropped to $795.5 billion at the start of 2011. This decrease comes just one month after the Fed announced the first month-to-month increase in consumer credit card debt in more than two years and suggests that December’s upturn was something of a one-off.

Revolving debt levels had fallen since September 2008, as borrowers relied less on credit cards and paid down debt. Banks, meanwhile, lent out less money and gave up on collecting some excessively late loan payments — known in the lending industry as charge-offs. Charge-offs take those debts off the bank’s financial records and eliminate them from the G.19 data. The combination of efforts by banks and borrowers caused revolving debt to plunge more than $178 billion from its peak in August 2008 through November 2010, the last of 27 straight months of credit card debt decline.

Although holiday spending boosted revolving balances in December, the trend apparently didn’t carry over into the next month. “I don’t believe retail sales were strong enough in January to generate a revolving credit gain,” says Gregory Daco, senior economist with IHS Global Insight in Lexington, Mass. Even as credit card spending increases, revolving debt levels can be held in check by consumers’ efforts to pay down debt and banks’ cautious lending practices.

The Fed’s consumer credit report tracks both revolving and nonrevolving debt, which includes auto loans, student loans and loans for mobile homes, boats and trailers. Taken as a whole, consumer credit increased 2.5 percent to $2.41 trillion in January. Nonrevolving debt jumped 6.9 percent to $1.62 trillion.

Economy recovering — slowly



While the economy has been strengthening over recent months, unemployment has continued to be a problem. The latest jobs report showed that U.S. employers added 192,000 jobs in February, causing the unemployment rate to dip to 8.9 percent and marking the first time in nearly two years that unemployment has fallen below 9 percent. However, that’s still a high jobless rate by historical standards.

When U.S. workers are more certain about receiving their next paycheck, they are more willing to shop: The latest data showed that retail sales increased 0.3 percent in January. The February retail sales numbers are due out on Friday, with an even larger gain expected.

But even as consumers increase their credit card spending, they remain fearful of carrying too much debt.

The Federal Reserve’s latest Beige Book survey, which polls the 12 regional Fed banks about local economic conditions, highlighted that trend. “A banker in North Carolina noted a marked pick-up in consumer borrowing, mostly with respect to credit card usage, but added that many consumers were paying down debt,” the Richmond Fed said in the report.

See related: Consumer credit card debt grows for 1st time since 2008, Fed says, Credit card ownership sees 1st jump since 2008