Do credit card users simply not care about income taxes?

A curious turn of consumer events is developing, and it might take the insight of a psychologist, rather than an economist, to explain it. Rather than falling, as anticipated, credit card debt is rising sharply.The consequences are costly: With borrowing rates rising, interest on that debt will, of course, be more costly. But perhaps even more important, taxes on that debt will be much higher this year than last.

Nevertheless, borrowers went on a binge in November, adding $4.5 billion more in consumer debt. Revolving credit, which grew more than 20 percent, accounted for $3.1 billion - made up increasingly of credit card activities.

Last year, 40 percent of interest paid qualified for deductions on income tax returns. This year, the total is cut to just 20 percent, a preliminary step toward eliminating the deductibility altogether.

The rise in consumer indebtedness doesn't necessarily mean that otherwise conservative individuals have decided to let go. It's more a reflection of the increase in the number of people working, which is the primary ingredient of so-called consumer confidence measures.

But the continued rise is a puzzle to those analysts of the 1986 tax changes who argued that one way to keep spending in bounds was to remove the tax benefits. Some even contended that the heyday of credit cards was ended.

One explanation now is that the phenomeon is a result not just of growing consumer confidence but of an actual need to use credit. That is, individuals with insufficient cash for their needs are reluctantly resorting to borrowing.

Another possibility is the marketing efforts of the credit card people, who offer various incentives and prizes based on a customer's continued use. Habit, convenience and some vendor insistence on cards tend to solidify usage.

Changes in tax deductibility were imposed as part of the Tax Act of 1986. By 1991 that deductibility will be phased out altogether, after dropping to 10 percent in 1990.

Included in the phaseout is interest not just on credit card charges, but financing charges and revolving charge account charges, cash advances, personal and automobile loans, student loans, insurance loans and tax deficiencies.

Still another expense is added to those using many bank cards. This is the annual fee, which some banks have added and others increased over the past year or more. Such membership fees generally are not tax deductible.

In December of 1986, after the tax bill was passed, the Federal Reserve reported that consumer installment debt amounted to $594.9 billion. At the end of November 1988, the same debt category totaled $665.51 billion.

While much of that increase can be explained in terms of a growing economy, it also suggests strongly that many people - by choice, need, indifference or ignorance - haven't been scared off by tax and other credit expenses.