Credit Card Debt Drops as Unemployment Climbs
The Federal Reserve's G-19 Consumer Credit report stated that non-revolving debt, like loans for auto, furniture and consumer electronics, fell a mere .3%. This was after declining more than 5% in March and April. Non-revolving debt is $1.591.2 trillion, or $13,603 per household. Note: This estimate is based on 305.6 million people in the U.S., an average of 2.6 persons per household, and 117 million households. (Source: U.S. Census, Population Clock; Average Household Size)
The decline in credit card use is the result of the credit crisis, which caused banks to restrict credit limits, and the recession , which means fewer families can afford big ticket purchases. Higher unemployment also means consumers are worried about keeping their job, and are more likely to pay down debt. The savings rate has increased 6.9% in May, the highest since 1993. The opening of new accounts declined 37% during the first three months of 2009 compared with the year before. (Source: CreditCards.com)
The availability of credit for personal consumption drives 70% of the U.S. economy. Declining credit purchases will lower the GDP growth rate.
What It Means to You
A soft economy caused by declining credit card debt is a good time to reduce your own financial vulnerability. Consult with your financial planner and develop ways to reduce your own credit card debt....and avoid becoming a statistic in the Federal Reserve’s G-19 report next month.
Related Articles
- Chicago Federal Reserve web site How to Budget
- About.com Guide to Credit, LaToya Irby Making a Plan to Reduce Credit Card Debt
- About.com Guide to Beginners Investing, Joshua Kennon More Resources for Reducing Credit Card Debt
(Photo Credit: Scott Barbour /Getty Images
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