Consumer Debt Hits Record High - and That's a Good Thing?

Learning How to Pay Off Debt

By Karla Bowsher

Consumer debt reached a new high in July -- and economists say it's a good sign.

Borrowing by consumers increased by $19.1 billion in July to reach a total of $3.45 trillion, according to the latest monthly report from the Federal Reserve, which was released this week.

The increase came from auto and student loans (up $14.8 billion) and consumer credit card debt ($4.3 billion). The Fed's credit reports don't include loans that are secured with real estate, such as mortgages and home equity loans.

While debt is generally bad news for personal finances, it reflects good news about the economy, CBS MoneyWatch reports:

Economists believe strong job gains will support increased borrowing and consumer spending, which accounts for nearly 70 percent of economic activity.

During the first quarter of this year, the economy grew by only 0.6 percent, according to CBS. During the second quarter, however, it grew by 3.7 percent, and economists believe growth will average about 3 percent in the third and fourth quarters of 2015.

As we reported this week, 173,000 jobs were added to the economy in August and 245,000 jobs were added in July, according to the latest unemployment report from the U.S. Bureau of Labor Statistics. That brought the jobless rate down to 5.1 percent -- the lowest it's been since 2008 -- and the BLS expects job growth to continue.

If you're among the many Americans carrying debt, be sure to visit the Money Talks News Solutions Center, where you can find help with credit card, student loan and tax debts as well as several types of loans.

How do you feel about the record increase in consumer borrowing in the Fed's latest report? Let us know what you think in a comment below or on our Facebook page.

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