Consumer Debt Continues to Decline

The amount of credit card debt that Americans currently hold has fallen a remarkable $86.2 billion from its peak of $975.2 billion in September 2008. That’s nearly a 10% decline according to recently released data from the Federal Reserve.

Credit cards are considered to be revolving debt while student loans and car loans are considered to be non-revolving debt.

There is a new mindset amongst consumers of frugality. We as a nation are eschewing debt for the first time in decades. The Fed’s data shows that for the past 12 consecutive months credit card debt has declined. Non-revolving debt has also declined steadily.

Credit card debt has in fact decreased at an annualized rate of 13.3% in both August and September.

All analysts pretty much agree that a collective national belt-tightening is occurring. People continue to be cautious. Banks and credit card issuers, for their part, also remain cautious as they continue to feel the sting of record high defaults .

Unemployment by the Numbers

In news that is very much related, the jobs report released yesterday shows that unemployment has reached 10.2% nationwide for the month of October. That’s the highest it’s been in over 26 years.

There is an absolute and direct corollary between the unemployment rate and the issuance and use of credit. When times are good Americans like to spend money. The flipside of that is what we are experiencing now.

We are finally beginning to emerge from one of the worst recessions that we have ever faced. While most economists agree that indicators point to a slow economic recovery, the jobless numbers would belie that.

Unemployment is actually a lagging economic indicator. During a recovery the last thing to show improvement is the jobs rate. So basically, only time will tell when the actual recovery began, and of course, if it’s sustainable.

In the meantime, American consumers will continue to spend less as they worry about where their next paycheck is coming from.

Related Information:

  1. Student Credit Card Debt Reaches Record Levels We all know that college tuitions are spiraling out of control. And now I’m afraid there is some more bad news to add to the equation. Credit card debt for…
  2. Consumer Debt Falls for the Seventh Straight Month Consumers continue to cut debt in the face of this seemingly endless recession. The Federal Reserve Board reported that August represented the 7th consecutive month that consumers have reduced their…
  3. Credit Card Companies Report Record Defaults It looks like it’s more bad news for credit card companies. All of the major credit card issuers reported seeing record default rates in the month of May. It is…
  4. The Future of Visa Inc. In our last post we discussed how Joseph Saunders, the Chief Executive of Visa Inc., foresees the new credit card reform legislation affecting his industry. In this post I think…