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Consumer credit card debt declined by more than $7 billion in May, marking a record 20th straight monthly drop, according to the latest Federal Reserve data.

The Federal Reserve G.19 report released Thursday indicated that consumers’ credit card balances fell 10.5 percent in May, extending a string of declines that started back in October 2008. Overall consumer debt fell as well — down 4.5 percent to $2.415 trillion in May.

The Fed’s monthly report looks at card balances and other forms of debt: Along with revolving credit — a loan category made up almost entirely of credit card debt — the G.19 report also weighs the total amount of nonrevolving debt, a type that includes auto loans, student loans and loans for mobile homes, boats and trailers.

With the U.S. economy still facing a difficult recovery, credit card debt continues to drop. The revolving debt component fell to $830.8 billion from $838.2 billion in April. At its peak in September 2008, U.S. credit card debt stood at $975.7 billion. It has plunged a total of $144.9 billion since then. That means the average U.S. household with credit card debt — of which there are roughly 54 million, according to government data — has eliminated roughly $2,683 in credit card debt during that period, as borrowers either paid down debt or had it charged off as uncollectable.

The Fed also sharply revised April’s numbers from the previous release. Last month’s release indicated a small 0.5 percent increase in overall consumer debt in April, but that number was changed to reflect a 4.5 percent drop for that month. The change was sparked by a major revision to the nonrevolving debt numbers. The previous release had shown a 7.1 percent increase in nonrevolving debt in April, but Thursday’s release showed that nonrevolving debt actually decreased by 5 percent in April. (Revolving credit numbers were basically unchanged in the two releases.)

Experts say the downward momentum in revolving credit is unlikely to shift over the next few months. “I don’t expect to see any increase until late this year,” says David Wyss, chief economist with Standard & Poor’s in New York.

AMERICANS CONTINUE TO SHED CREDIT CARD DEBT For a record 20 straight months, consumers’ credit card debt has continued to shrink. The chart above shows how much less credit card debt Americans have than they did when revolving debt hit its peak of $975.7 billion in September 2008. Note: Decrease is cumulative, and shown in billions of dollars.

Those who can pay off their card debt, do

Why are credit card debt levels dropping? According to consumer advocates, borrowers who can afford to pay their bills are working to reduce their debt levels. “Most consumers I hear from who are employed and able to do so are paying down balances and look forward to removing the yoke represented by revolving credit balances,” says Linda Sherry, director of national priorities for nonprofit education and advocacy group Consumer Action.

New data from the American Bankers Association seems to back that up, showing that consumers are increasingly making on-time card payments. Late payments — or delinquencies — fell to their lowest percentage in eight years as U.S. consumers borrow less and save more. Credit card delinquencies fell to 3.88 percent in the first quarter of 2010 from 4.39 percent in the fourth quarter of 2009.

But with the unemployment rate at a still-high 9.5 percent in June, some borrowers simply can’t afford to pay down their debts right now. In fact, cardholders without any income may be forced to charge basic expenses on their plastic. “I feel like people with balances today have to be in desperate straits to add to those balances,” Sherry says.

Banks limit lending

It’s not always possible for cardholders to add to their balances, however. While plastic may offer a lifeline to some struggling consumers, banks are less willing to extend lines of credit.

Amid the Credit CARD Act‘s restrictions on their business and as the economy’s ongoing struggles, card issuers have tightened their lending standards. That means it’s more difficult for the typical consumer to borrow money. It’s also become more costly: CreditCards.com data shows that the average interest rate on a new card offer currently stands at 14.43 percent, up from 12.87 percent six months earlier.

Despite all the challenges borrowers continue to face, some experts are nevertheless accentuating the positive, noting that cardholders are becoming more resilient. “Consumers today may be looking for authenticity in their lives,” Sherry says. “The fallout in the economy has moved us somewhat away from the consumerist mindset, and as a nation I think we are focused more on ‘needs’ than on ‘wants,'” she says.

See related: Consumers paying more credit card bills on time, Credit card interest rates end five-week run of increases, Credit card reform arrives in the form of the Credit CARD Act,Credit card lending standards keep tightening, Fed report says, Poll: 2 out of 5 credit cardholders report getting whacked, Calculate the cost of just paying the minimum, Calculator: How long until my card balance is paid off?, Credit card rates: interactive graphic on APR changes