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Unemployment and weak economy effects consumer debt

Going by current consumer debt numbers, while the economy is continuing to struggle, many are still taking on student loan and auto loan debt. The thought is that as the economy continues to improve, consumers will once again feel confident enough to take on credit card debt.

According to the Federal Reserve, overall consumer debt reached an all time high of $2.74 trillion. This was after an $11.4 billion increase from August until September.

However, while student loan debt continued to increase, credit card debt actually decreased for the third time in the past four months. The thought is that with unemployment still hovering around 7.9 percent, most are still hesitant to take on credit card debt due to the fact that credit cards tend to have higher interest rates.

When looking at just credit card debt, four years ago the overall total had reached $1.03 trillion in debt. In September, the overall figure was 17.1 percent lower than that all-time high.

In terms of unemployment, as just mentioned, the rate was close to 8 percent in October. Of course this is good news compared to the 10 percent peak post-recession, but it is still a ways off from the 6 percent that economists say puts the U.S. in healthy job market standing.

This unemployment rate is also part of the reason that there was an increase in student loan debt. Many who have been laid off or out of work for some time have decided to go back to school. Their plan is to graduate and be able to find a job in their chosen field.

Source: CBS News, "Student debt, auto loans lift borrowing to record level," Nov. 7, 2012

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