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Loans drive rise in consumer credit; Borrowing drops on credit cards

Americans took out more loans to buy cars and attend school in February but used their credit cards less frequently for the second straight month.

The Federal Reserve said Friday that consumers increased borrowing by $8.7 billion, the sixth straight monthly increase.

The jump in borrowing was driven by an $11 billion increase in the category that mostly measures demand for auto and student loans. Borrowing on credit cards fell by $2 billion after a $3 billion decline in January.

Total consumer borrowing rose to a seasonally adjusted $2.52 trillion. That's nearly at prerecession levels and up from a post-recession low point of $2.39 trillion reached in September 2010. Borrowing had tumbled for more than two years during and immediately after the recession.

Consumer borrowing rose by $18.6 billion in January, following similar gains in December and November. The gains for those three months were the largest in a decade.

A rise in borrowing could suggest consumers are feeling more confident about the economy. However, few are comfortable enough to step up credit card use. Consumers carried $799 billion in credit card debt in February -- 15 percent less than they held in December 2007, the first month of the Great Recession.

Steven Wood, chief economist at Insight Economics, said February's borrowing increase was strong, but it was the smallest increase since October.

"Consumers still appear to be reluctant to use their credit cards," Wood said in a note to clients.

Consumers are taking on more debt at a time when their wages have not kept pace with inflation. And they are paying more for gas -- the average price per gallon nationally was $3.94 on Friday.

Households began borrowing less and saving more when the recession began and unemployment surged. While the expectation is that consumers are ready to resume borrowing, they are not expected to load up on debt as they did during the housing boom.

The Federal Reserve's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.