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June 12, 1996


Associated Press Writer

WASHINGTON (AP) -- Consumer credit rose 6.9 percent at an annual rate in April, the smallest since mid-1993, and a bankers's trade group said credit card delinquencies suggest many Americans may be reaching their debt limits.

The Federal Reserve reported Tuesday that consumer credit increased by $6.6 billion, slower than the $9.3 billion gain in March. The 6.9 percent gain was the slowest since such debt grew at a 6.8 percent rate in August 1993.

The advance boosted total consumer credit to $1.14 trillion.

Consumer credit includes all household debt not secured by real estate.

Many analysts maintain that consumers are becoming overburdened by debt, which will force them to spend less and slow economic growth as well as miss payments on existing loans.

Consumer spending represents about two-thirds of the nation's economic activity.

Indeed, the American Bankers Association reported Tuesday that credit card delinquencies jumped to 3.53 percent during the January-March quarter from 3.34 percent in the final three months of 1995.

It was the highest delinquency rate since 3.58 percent during the fourth quarter of 1981 when the economy was in recession.

"This latest rise in credit card delinquencies is a signal that more consumers are hitting their debt limits," said James Chessen, the organization's chief economist.

Still, other economists believe the debt accumulation problem is exaggerated, contending credit cards are used more frequently now as a convenience to avoid carrying large amounts of checks or writing a series of checks and are paid off at the end of the month.

"The Fed does not factor out how much is not actual debt," said Lawrence Chimerine, managing director and chief economist of the Economic Strategy Institute. "It's normal spending with cards instead of cash and checks."

Nevertheless, the ABA survey also found closed-end loans 30 days past due increased to 2.14 percent from 2.12 percent in the fourth quarter. A year earlier, 1.82 percent of these loans, which include automobile loans, were delinquent.

The Fed said that revolving credit, which includes credit cards, shot up at a 20.2 percent annual rate in April after rising 15.3 percent the previous month. The $7.3 billion gain pushed the total to $438.5 billion outstanding.

Automobile loans rose at a 10.8 percent annual rate, more than twice the 5.1 percent increase in March. The $3.2 billion increase raised the total to $359.5 billion.

But the category that includes loans for mobile homes, education, boats, trailers and vacations fell $3.9 billion to $342.2 billion. The 13.6 percent rate of decline compared with an 8.6 percent advance a month earlier.

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