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Consumers spending more on credit cards, keeping balances lower

Consumers are using their credit cards for more and paying down their balances, according to a new survey released Wednesday. 

The American Bankers Association (ABA) released a report showing that in the July-September quarter of last year, consumer spent more on non-essential goods and service while the average ending balances fell nearly 5 percent, a sign that consumers are less likely to use their cards for long-term debt purposes.

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"This suggests that consumers aren’t just using their credit cards more, they are also more likely to pay off or pay down their monthly balance,” said Kenneth Clayton, executive director of ABA’s Card Policy Council.  

"As a result, the amount consumers are paying in interest as a share of their outstanding credit card balance declined for the 13th consecutive quarter.”

All told, about 60 percent of credit cards were used at merchants more likely to be associated with discretionary spending.   

Spending at discretionary merchants, such as travel agents, rose 3.5 percent year-over-year, while spending at nondiscretionary merchants, like drug stores, was up just 1.4 percent.  

“We’re seeing a more confident consumer who is willing to spend more money on non-essentials because they’re less concerned with the direction of the economy and their ability to keep debt at manageable levels,” Clayton said.  

“Whether this trend will continue remains to be seen."

Other finds show that spending on rewards credit cards increased by 7.8 percent for all risk categories, rising for nearly all merchants.

“This data suggests that the benefits of rewards cards are widely distributed among consumers and retailers,” Clayton said.

Still, credit availability remains constrained in certain segments of the card market.

While total credit lines increased by 4.6 percent year-over-year, the increase was entirely due to rising credit availability for super-prime accounts.  

Credit lines for prime and sub-prime accounts continued to decline.

"Despite slowly easing credit standards and an improving economy, we continue to see a dramatic shift toward lower-risk accounts in the credit card space,” Clayton said.  

"A more conservative approach by lenders, combined with regulatory constraints that make it more difficult to manage risk, has clearly played a role in this market shift.”