by Alison Storm | 09/9/10

For the 23 consecutive month, Americans have cut back on their credit card use. July numbers released by the Federal Reserve show that borrowing dropped at an annual rate of $3.6 billion in July, marking the 17th drop in credit in the past 18 months. But while the plastic may be holding tight in Americans' wallets, they are borrowing money for new cars, according to The Associated Press. There was a .6 percent increase in auto loans.

Economists predicted the drop in credit card use, but say the plunge was a bit higher than they expected. The July decline followed a $1.02 billion drop in June. So why aren't we using our credit cards quite as much? Experts say it's because of tighter lending standards by banks who have experienced lots of loan losses. "On the demand side, households continue to show signs of caution as they face high unemployment, minimal wage increases and poor housing conditions," Gregory Daco, senior U.S. economist at IHS Global Insight, told the Associated Press. "On the supply side, tight lending remains the norm."

While the July drop may seem significant, it reflects a 1.8 percent decline. Americans seem to be spending less and saving more. Lower consumer spending can have a big impact on the economy because it accounts for 70 percent of activity. And the experts aren't expecting any big changes as long as incomes remain low and unemployment high.