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Americans are borrowing more for cars and college, according to new government figures, but remain cautious about spending on credit cards or taking bigger investment risks with their money.
U.S. household debt grew by a 2.4 percent annualized rate in the final quarter of last year, the fastest pace since the first quarter of 2008, the Federal Reserve reported Thursday.
Consumer credit -- excluding mortgages -- increased by 6.6 percent during the period, dominated by a more than 9 percent increase in auto loans, student loans and other installment loans. Credit card balances contributed an increase of less than 1 percent during the period.
While outstanding mortgage debt shrunk by 0.8 percent, the decline was the smallest since the first quarter of 2009 when mortgage debt edged up 0.2 percent. The decline comes as the housing market stabilizes. Mortgage applications have been rising as home values, home sales and housing starts increase. Banks are steadily writing off fewer home loans, too.
"It's a slow evolution to normalcy," says Paul Edelstein, director of financial economics at IHS Global Insight.
Edelstein noted that much of Americans' appetite for debt is confined to auto loans and student loans. Many consumers put off buying new cars during the recession and are now in the market as auto loan rates hover near historic lows. Student enrollment and debt steadily keep climbing.
But credit card balances have remained flat for the past year. At the same time, Americans are choosing safe, more liquid places to stash their cash even as their net household net worth nears prerecession levels.
"That signals elevated caution on part of households even with the increase in household net worth," he says.
Checking deposits and cash grew by almost 22 percent from the third quarter; Treasuries increased by just more than 10 percent; and money market funds rose by 6 percent. Investments in company stocks inched up less than 2 percent during the same period.
"Confidence and expectations for growth and jobs are still subdued," Edelstein says, "which is one of the overriding problems in the economy today."
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Janna Herron is a co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters.
