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Americans are feeling more comfortable about debt

May 8, 2012 at 7:40 AM ET

The financial shocks that began in 2007 prompted a lot of Americans to change their free-spending ways, especially when it came to taking on debt.

Several years on, some Americans may be reversing course, either by choice or necessity.

The Federal Reserve said Monday that Americans sharply increased their borrowing for big-ticket items like cars and education expenses in March and whipped out their credit cards more often.

Experts say the surprising increase of more than $21 billion in consumer borrowing may be a sign that Americans are feeling more comfortable taking on debt again. Or it could be that many are running out of other options.

With the economy still relatively weak, many say it’s doubtful that Americans have forgotten the harsh impact of the recession, financial crisis and credit crunch.

“I would hope that we as consumers have learned our lesson from the economic downturn that hey, we’ve got to watch our spending and spend what we can afford,” said Bill Hardekopf, CEO of lowcards.com, a credit card comparison website. “I would think a great number of people did learn that.”

But even with those lessons in mind, some Americans may feel they have to borrow money.

Paul Edelstein, director of financial economics with IHS Global Insight, said consumers may be taking out car loans because, after years of scrimping and putting off major expenses, they have little choice.

“People are in a position where they have to buy new cars,” Edelstein said.

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Americans also may be rushing to take on student loan debt because they’re worried about a potential increase in the borrowing rate, he said. The interest rate on certain student loans could increase to 6.8 percent in July, from 3.4 percent currently, if Congress doesn’t take action.

It’s also possible that students are taking on new student loans faster than the old ones are being paid off thanks to the weak job market, said Alex Matjanec, co-founder of MyBankTracker.com, which provides information about banks, loans and credit cards.

Revolving debt – which is largely composed of credit card debt – accounted for about $5 billion of the increase in March. Still, total credit card debt is much lower than five years ago, before the recession, housing crisis and credit crunch changed people’s habits significantly.

Hardekopf said part of the reason for the March increase could be an aggressive push by banks to get people with good credit to use their cards more. He said banks have been pushing better incentives and rewards, although interest rates have not changed much.

Hardekopf also has seen an increase in credit card offers to higher-risk borrowers with lower credit scores. After years of tight credit they may be getting tempted by the more aggressive offers, he said.

Edelstein said he doubts people will go back to the free-spending, pre-recession days.

One big reason: Housing wealth, or a lack thereof. Before the housing bubble burst many Americans enjoyed the security of having a lot of equity in their homes. These days, with so many homes underwater, people are more likely to have to rely on their paycheck.

“You don’t have that cushion,” he said.

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