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Not surprisingly much of the economic news has focused on the financial crisis in the housing market. What has received less attention is the consumer credit market. As the table below shows, consumer credit outstanding has increased from a bit more than $2 trillion in 2003 to $2.5 trillion by the end of the second quarter of 2008, representing a 25 percent increase over five years. Out of this total increase, consumer revolving credit (usually in the form of credit cards) has increased by 26 percent. Nonrevolving credit (usually in the form of car loans, and loans for mobile homes, education, boats, trailers, and vacations) increased by nearly 24 percent.
Nonrevolving consumer credit was growing at a higher annual percentage rate of increase in 2003 and 2004 than it has been more recently, as is shown in the table. On the other hand, the annual rate of increase in consumer revolving credit (or credit card debt) accelerated significantly in 2006 and 2007, and only slowed in the first half of 2008. 
Source: Federal Reserve, Sept. 2008 | Consumer Credit Outstanding | | 2003 - 2008 | | Billions of U.S. Dollars | | | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 (end IIQ) | | Total | 2,078 | 2,192 | 2,285 | 2,387 | 2,521 | 2,587 | | Revolving | 770 | 800 | 824 | 875 | 935 | 970 | | Nonrevolving | 1,308 | 1,392 | 1,461 | 1,513 | 1,582 | 1,617 | | Source: Federal Reserve, Sept. 2008 | Annual Percentage Change from Previous Year
| | | 2003 | 2004 | 2005
| 2006
| 2007
| 2008 (end IIQ)
| | Total | 5.3 | 5.5 | 4.3 | 4.5 | 5.6 | 2.6 | | Revolving | 2.9 | 3.8 | 3.1 | 6.1 | 7.4 | 4.8 | | Nonrevolving | 6.7 | 6.4 | 4.9 | 3.6 | 4.5 | 0.5 | | | | | | | | | | Per Capita Money Income | 2.2 | 5.1 | 4.9 | 5.6 | 5.1 | | | Per Capita Real Income | -0.01 | -0.01 | 1.5 | 2 | -0.01 | | Source: Federal Reserve and U.S. Census Bureau, Sept. 2008
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The annual percentage increases in outstanding consumer credit is more or less in line with the annual rate of increase in per capita income in the United States between 2003 and 2007, the table shows. However, when consumer credit outstanding is compared to the annual increases in real per capita income, a different story is seen.
According to the U.S Census Bureau data for the period 2003-2007, real per capita income has barely gone up by between 1 and 2 percent. While people’s real income has only marginally increased over the last five years, their consumer credit burden has risen significantly. Until now, the data suggested that people attempted to keep their consumer credit payments current so they could continue to make purchases with their credit cards. At the same time, they allowed their mortgage payments to fall behind if they found it increasingly difficult to make ends meet. But if the economy does fall into a serious recession, a growing number of people also may find it hard to make their consumer credit payments. This will place even more pressure on the commercial banks and retail businesses that have extended these lines of credit to their customers. And another bomb may go off in the current economic crisis.
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