What is Consumer Credit, and does it matter to me?

consumer credit written out in a white background, consumer is in red and credit is blue.

We hear a lot about consumer credit in the news: “Consumer Credit is Up,” “Consumer Credit is Flat,” and so on.  But what is consumer credit? Should you care?

In general terms, consumer credit is debt that is taken on by individuals who intend to spend the funds right away. If you borrow money to buy a car or use a credit card to pay for a meal, you’re using consumer credit. If you borrow money for investment purposes, to start a business, or to purchase a home, you’re not using consumer credit. The whole point of consumer credit is to consume something today that you otherwise wouldn’t be able to afford until later.

For the United States as a whole, measuring consumer credit tells us important things about our economy. If consumers have the ability to borrow easily and repay those debts on time, then the economy should be stimulated and we will have growth.  So if you’re an economist, “What is Consumer Credit?” is a good question to ask. But is the same true of a consumer?

Does Consumer Credit matter?

Of course, you need to understand what credit is and how it works. But if the Federal Reserve reports that “Consumer Credit is up” by some amount (it was up 0.4% in their most recent report), should that matter to you?

For most of us, the answer is no. Our advice is to avoid taking on new debts of any kind, and to work to pay down existing debts as aggressively as possible. If the rest of the country’s credit debt increases or decreases, that should have no effect on you. For professionals in the credit industry, it’s important to follow these trends, but if you’re a consumer trying to pay down your debts, you needn’t ask “what is consumer credit”.

Economic experts might be encouraged by reports that consumer credit is up—the economy may be growing, and in recovery. None of that affects your personal struggle to pay down debts. Calculating and interpreting these figures is something we do to evaluate how the economy is doing, but it’s not something that should inspire you to borrow more or pay down your debts any slower.

If you’ve used consumer credit and credit cards in particular, our certified counselors can help you come up with a plan to get yourself out of debt as quickly as possible. Call us today or use this website to talk to a counselor free of charge.

Article written by
Melinda Opperman
Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovative ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over two decades of experience in the industry.

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