More Confident Consumers Break Out Credit Cards

By Martin Crutsinger | February 7, 2011 | 4:43 PM EST

Washington (AP) - Americans are putting more money on their credit cards after more than two years of cutting back, a sign of more confidence in the economy.

The first increase in credit card use in 27 months helped boost overall consumer borrowing 3 percent in December, to a seasonally adjusted annual rate of $2.41 trillion. It was the third straight monthly gain.

Borrowing in the category that includes credit cards rose 3.5 percent. Borrowing on auto loans increased 2.8 percent.

Even with the December gains, consumer borrowing is just 0.7 percent higher than the more than three-year low hit in September. It is 6.6 percent below the high set in July 2008.

Households began borrowing less and saving more after the country fell into a recession in December 2007. The decline in borrowing has dampened growth because consumer spending accounts for 70 percent of total economic activity.

Economists believe consumers this year will gradually borrow more money. However, they don't expect Americans will borrow at the pace seen in the middle of the last decade. Soaring home prices made households feel wealthier than they were, and that encouraged them to borrow and spend more.

Analysts had expected a rise in total borrowing in December, reflecting strength in auto loans. But they didn't anticipate a rise in credit card debt. Both auto sales and overall retail sales showed increases in December. Retailers closed out their best holiday shopping season in four years.