Consumer borrowing falls again in August, marking 2 years of monthly drops for credit cards

Consumers cut credit card borrowing for 24th month

WASHINGTON — Consumer borrowing fell again in August as consumers cut back on credit card use for the 24th consecutive month, the Federal Reserve said Thursday.

Borrowing by consumers declined by $3.3 billion that month. It was the 18th drop for overall consumer borrowing in the past 19 months.

Americans are borrowing and spending less as they face widespread unemployment and uncertainty about their financial futures. The reduced use of credit by consumers is a drag on the recovery, which has yet to show a sustained rebound.

Households are struggling to repair their personal balance sheets after the worst recession since the 1930s. The home foreclosure crisis is grim evidence that excessive borrowing can upend people’s lives.

Another cause of the decline in credit is banks’ slow recognition that many debts will not be repaid. Banks gave up on $42.5 billion in credit card debt in the first half of 2010, according an analysis by the website CardHub.com. The annual rate is more than twice what it was in 2007.

Banks have responded to loan losses by tightening lending standards and reducing credit lines.

Borrowing increased modestly for one-time loans such as auto loans and student loans. Student loans by the federal government accounted for almost all of that increase. One-time credit from banks that offer loans for cars and other big purchases fell in August.

Households are expected to continue cutting back on borrowing as long as incomes stay flat and jobs remain scarce.