Sunday, August 29, 2010
Lowest credit card debt level in past eight years
With the U.S. economy in shambles for the few years and more and more credit card debt building with the innovation of credit and online shopping, credit card debt has become a real problem in today's society. However, there is hope. With credit card debt falling under $5,000 for the first time in eight years and people making more timely payments, people and their debt look to be correcting themselves. This 13% decrease, from the national average of $5,719 last year, shows great improvements in the saving power that Americas were thought not to have.
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On the other hand, an increase in current savings will not help the US get out of the current recession. Is it preferable to lower credit card debt now or to have people out spending to boost the economy?
I read a similar story from CNN about how Americans are saving much more today than they were 10 years ago. I believe that it should be more preferable for Americans to lower credit card debt now and let the economy slowly improve itself.
I think if you look in further regarding the debt level, the credit card debt might be triggered by the high credit card interest rates (average of 14.7%). Therefore, people may be trying to pay off before the interest kicks into their bills.
I think some of the decrease in average credit card debt may also be due to the changing regulations regarding credit card issuers' treatment of consumers. Even such simple new regulations as having the effects of simply making the minimum payment displayed on each monthly bill probably help encourage consumers to pay down their debt.
Another interesting fact discussed in another of my classes this past week pertaining to this article is that 2009 was the first year that consumers used their debit cards more than their credit cards for the first time in history. I think that consumers are feeling weary about future credit markets and/or their employment and thus are trying to work hard to pay down their outstanding debt. Also the recession has caused the media to place increased attention on the economy which is increasing the already present stigma associated with credit cards and debt. This increased stigma may be another contributing factor the decline in credit card debt.
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