Consumer borrowing surged in March by the most in more than a decade thanks to growing demand for student loans and autos.

Overall consumer credit rose by $21.4 billion, up 10.2% to $2.54 trillion for the biggest gain since November 2001, Federal Reserve figures showed Monday. The gain was paced by a $16.2 billion jump in non-revolving debt.

Consumers may have been trying to secure school financing before a possible increase in interest rates takes place on July 1. Rising consumer confidence also means that households are more willing to take on debt to boost spending, which accounts for about 70% of the economy.

Revolving consumer debt, 98% of which is credit card borrowing, rose in March by $5.1 billion to $803.6 billion, up 0.6% from $798.5 billion in February, the Fed said.

U.S. credit card charge-offs are at record-low levels and likely will hit bottom within the next three to six months, Fitch Ratings Inc. said in a report Tuesday.

The combined effects of extremely low loss rates plus a modest return to growth of revolving debt, which drives credit card industry profits, are a positive sign for major bankcard issuers, Fitch suggested.

The firm now "believes revolving credit will continue to tick upward relative to 2011 levels, as economic indicators demonstrate some stabilization and improvement."

But any growth will be incremental, Fitch suggested. Credit card portfolio loan balances may have reached the bottom, but based on recent trends, issuers may expect to see portfolio growth this year in the low single digits, the firm said.

In January and February, according to the Fed, consumer debt had fallen after rising steadily for four straight months. Analysts say that shrinking card balances in January and February were likely related to seasonal factors - such as paying off holiday debt - and not an indication that consumers are pulling back on credit. In fact, the increases in five of the past seven months proved to be a significant turnaround from the previous three years when recession-weary consumers concentrated on paying down their existing card debt.

Banks are slowly easing their lending standards, according to data released at the end of April by the Federal Reserve, and cardholders with less-than-perfect credit are finding it easier to qualify for cards with favorable terms. Meanwhile, consumers are showing a bigger appetite for credit and applying for more cards.  

During the recession, banks made it much more difficult for consumers with less than perfect credit to borrow, and charged off significant debt from those unable to pay their bills. At the same time, consumers had cut back on spending and largely ignored new card offers. But with the economy showing life, cardholders and banks are beginning to reconcile and that's widely seen as good news for economic growth.

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