Americans cut back on credit card use in September

Consumers increased their borrowing by $13.7 billion in September to a seasonally adjusted $3.05 trillion, the Federal Reserve reported Thursday. That is a record and follows a gain of $14.2 billion in August.

The increase was driven entirely by higher borrowing for auto and student loans, which rose $15.8 billion. Credit card debt fell $2.1 billion following a decline of $885 million in August.

The string of declines in credit card debt will likely hold back consumer spending, which accounts for 70 percent of economic growth.

The measure of auto loans and student loans has risen 8.5 percent from a year ago and has increased in every month but one since May 2010.

But credit card debt is essentially where it was a year ago. And it is 17.2 percent below its peak hit in July 2008 — seven months after the Great Recession began.

Slow job growth and small wage gains have made many Americans more reluctant to charge goods and services.

But at the same time, the weak economy is persuading more people to go back to school to learn new skills. The Federal Reserve Bank of New York quarterly report on consumer credit shows student loan debt has been the biggest driver of borrowing since the Great Recession officially ended in June 2009.

Analysts had hoped that consumers would step up spending and help drive faster economic growth in the final three months of the year.

But a partial government shutdown in October lasted 16 days and left thousands of government workers temporarily without paychecks.

That disruption is expected to hold back growth in the fourth quarter. Many economists believe the overall economy is growing at a rate just below 2 percent in this quarter, down from growth of 2.8 percent in the July-September quarter.

The Fed's borrowing report tracks credit card debt, auto loans and student loans but not mortgages, home equity loans and other loans secured by real estate.