Consumers Cut Back on Borrowing in November

Consumer borrowing fell in November for the first time in four years, the Federal Reserve said Wednesday, evidence that Americans are becoming more wary of taking on debt.

Borrowing through credit cards and other types of loans fell by $2.2 billion in November after rising $1.5 billion in October, the Federal Reserve said. The decline is the first since January 1998 and the biggest since a $2.4-billion drop in October 1991. The credit figures often are volatile and some previous declines have later been revised into gains.

Unemployment -- at an eight-year high in November -- has shaken consumer confidence, prompting households to take on less debt. Holiday sales at Target Corp. and Wal-Mart Stores Inc. were lower than forecast, suggesting that consumers may not lead the economy to a firmer footing.

“Households continue to use debt with great caution because of worries about sluggish job markets and an already high debt burden,” said Steven Wood, principal economist at Insight Economics in Walnut Creek, Calif. “Although consumers can be tempted to borrow when interest rates are very low, they are growing their non-mortgage debt more slowly.”

Consumer borrowing totaled $1.722 trillion in November, the Fed said. The report doesn’t include loans secured by real estate, such as mortgages and home equity lines of credit.

Americans may be taking advantage of the lowest mortgage rates in four decades to refinance and use the equity in their homes to pay off loans and maintain spending instead of taking on more costly credit card debt.

The Mortgage Bankers Assn. of America’s refinancing applications index increased 29.1% last week to the highest level since mid-November, the group reported Wednesday.

Credit card and other revolving debt fell by $1.6 billion in November, after a $2.4-billion increase in October.