So Much for Deleveraging

Yes, households have been paying off their credit cards, but there's another IOU they don't have under control: nonrevolving (or installment) debt, says the Federal Reserve Bank of Cleveland.

The percentage of households with a balance on their credit cards fell from 46 to 39 percent between 2007 and 2010, according to the Survey of Consumer Finances. In contrast, there has been little change in the percentage of households with installment loans--46.9 percent in 2007 and 46.3 percent in 2010. The two major components of installment debt are auto and education loans. Frustratingly, the Fed's analysis of the 2010 Survey of Consumer Finances did not examine these individual components.

For the average household with debt, installment loans are much more serious than credit card debt because they are nearly five times larger (a median of $12,600 versus $2,600 in 2010). The Cleveland Fed notes that total household borrowing as a share of disposable income has been rising since the second quarter of 2009. That's because installment debt as a share of disposable income is now at a record high.

Source: Federal Reserve Bank of Cleveland, Consumer Deleveraging May be Over