According to the Federal Reserve consumer credit declined at an annual rate of 3 1/4% in the 2nd quarter of 2010 in the United States while revolving credit which includes credit card debt declined at an annual rate of 9 1/2%.

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Why does demand for consumer credit keep declining in the United States?

The answer is simple - because money is worth more today than it was a few years ago. Anytime money appreciates in value the demand for consumer credit will decline because anyone borrowing money that has appreciated in value ends up paying back their loan with money that is worth more than when they borrowed it.

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Beginning in 2007 as a result of the Federal Reserve having withdrawn close to $750 billion dollars of money from the US economy banks in the United States started taking massive write-offs of loans. As the write-offs of loans continued less money was available in the economy so all remaining money appreciated in value. As money appreciated in value the demand for consumer credit of all types from credit cards to mortgages to home equity loans declined appreciably.

Consumer Credit Outstanding

2007 demand increased by 5.7%

2008 demand increased by 1.5%

2009 demand declined by -4.4%

2010 1st Quarter demand declined by -1.8%

2010 2nd quarter demand declined by -3.2%

As money appreciated in value beginning in late 2007 the demand for all types of consumer credit started declining and by 2009 the demand had turned negative where it remained through the 2nd quarter of 2010. Until the appreciation in money is taken away the demand for consumer credit of all types whether it be mortgages, home equity loans or credit card debt will continue to be negative as consumers will borrow less money until money starts depreciating in value again.

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Sources:http://www.federalreserve.gov/releases/g19/current/g19.htm