WASHINGTON -- Americans cut back on the use of credit cards to borrow money at the sharpest rate in 18 years, but that doesn't mean they're spending less.
Credit card debt outstanding fell at a seasonally adjusted 7.2 percent annual rate in May, compared with a gain at a 3.8 percent rate the month before, the Federal Reserve said. It was the largest monthly decline since June 1980.
Overall, consumer borrowing -- which also includes loans for autos, mobile homes, education, boats and vacations -- advanced at a scant 0.3 percent rate in May -- the weakest since November. That compares with an increase at a 5.4 percent rate in April. Debt outstanding totaled a seasonally adjusted $1.25 trillion.
Economists said the retreat in credit-card borrowing doesn't necessarily mean consumers are losing their appetite for spending. After all, a separate Commerce Department report on retail sales during the month showed strong gains for autos, furniture and department-store goods.
Rather, it probably reflected a push by lenders to steer consumers away from unsecured credit cards and toward secured home equity credit lines, which aren't covered by the Federal Reserve report.
"Lenders have become more cautious ... after significant losses on credit cards in the last two years," said economist Lynn Reaser of NationsBank Corp. in Jacksonville, Fla. "Second, home equity lenders have aggressively marketed their instruments. Third, individuals have had good increases in income ... so they haven't had to rely so heavily on credit cards."
Auto lending in May increased at a 3 percent rate, compared with a 3.2 percent rate in April. Other consumer loans increased at a 10.7 percent rate, compared with 11.5 percent the month before.
Advice from the Consumer Federation of America on handling credit card debt: