Credit CardConsumers have cut back on their credit card use for the 23rd month in a row, according to a report released yesterday by the Federal Reserve. Credit card debt dropped by 6.3% in July.

Applications for mortgages dropped for the 1st time in 6 weeks. Refinancing applications dropped by 3.1%.

Borrowing for auto loans was up, but this was offset by the declining use of credit cards, for this borrowing category.

Analysts say that the downturns in borrowing and credit card use reflect the realities that many households are experiencing: lower incomes, joblessness, tighter budgets.  Another factor is the tightening of credit requirements and rising credit costs, as banks respond to the growing amount of bad debt.

The unemployment rate climbed to 9.6% in August, up from 9.5% in July, according to the federal government. Payroll jobs fell by 54,000.

While Americans have been scolded for high debt and low savings for years, experts are now saying that the drop in borrowing, with consumers cutting back on their purchases, is harming the economy overall. Consumer spending accounts for 70% of total economic activity in the U.S.

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