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POLITICS: PennAve

Americans are using credit cards more. Here's why that's a good thing

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Politics,Finance and Banking,PennAve,Joseph Lawler,Economy,Credit Cards,Consumer Confidence

Americans are increasingly ready to take on debt to make all kinds of purchases, data released by the Federal Reserve Thursday show, and are embracing credit card spending.

It's a sign that consumers recovering from the recession might be finished shoring up their finances and prepared to spend freely.

Consumer borrowing grew at the fastest pace since the recession, slightly less than 8 percent annually, according to the Fed's data for June published Thursday afternoon.

Revolving credit — a category that is mostly credit card debt — grew at a 5.4-percent annual clip in the quarter, the fastest rate of the recovery by far.

Borrowing for college tuition and cars also grew quickly, at the second-fastest rate of the recovery.

Overall, 2014 has been the strongest year so far for consumer borrowing since the mortgage crisis and recession led Americans to cut spending and rein in debt. That process of deleveraging now appears to be behind the country.

Banks have also become more willing to loan. The Fed's survey of loan officers at banks published earlier in the week showed that banks loosened lending standards across a broad categories of loans, especially for prime mortgages. The banks also reported a pick-up in customer demand for loans.

Top economic policy makers hope that credit terms will continue easing and that consumers will increasingly borrow to finance additional spending. The Federal Reserve's monetary policy committee, including chairwoman Janet Yellen, see tight credit as an obstacle to a faster recovery, but expect greater borrowing to accelerate growth in the months ahead.

The Obama administration wants to expand mortgage credit in particular. Federal Housing Finance Agency director Mel Watt, a newly installed Obama appointee, announced in the spring that he would move the bailed-out mortgage businesses Fannie Mae and Freddie Mac toward making home loans accessible to more families.

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