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Over the past year, faced with the prolonged economic downturn, many US consumers have reined in spending and pared down household debt, in particular credit card debt. According to a recent Associated Press-GfK poll, the average credit card debt among those surveyed dropped from $5,600 to a more modest $3,900.
National statistics also bear out the declining levels of credit card debt. Total outstanding credit card debt has declined from $975.7 billion in the eighteen months from September 2008 to $852.6 billion in March of this year, a 12.62 percent decrease, which has shaved off a total of $123.1 billion from Americans’ credit card balances.
However, despite the apparent improvements in American’s personal finances, 46 percent of those surveyed still reported feeling debt-related stress. Furthermore, half of those feeling burdened by their financial obligations described their stress as a “great deal” or “quite a bit.”
Those in lower income brackets, perhaps not surprisingly, appear to be under the greatest amount of pressure: families earning under $50,000 per year have only slightly added to their debt, yet their reported stress levels have risen steeply. However, even those making over $50,000 a year aren’t immune to feeling financial pressure; despite cutting their credit card debt by over 50 percent, those in the more affluent income bracket still experience the same level of debt-related stress they did previously.
However, economists point out that defaults on credit card debt contribute to the visible debt reduction, which could explain why, although statistics show declining debt levels among consumers, stress continues to hold on. In addition, with unemployment rates still hovering around 9.7 percent, the ongoing economic uncertainty continues to be a source of stress for consumers, particularly those carrying high levels of household debt.
It remains to be seen whether Americans’ heightened concern over debt will signal the early stages of a more conservative attitude towards credit, which could pave the way for a more debt-free future.
Overall consumer debt (not including mortgages) decreased last year by 1.7 percent to $13.4 billion according to the Fed—and while that may not sound like much, it is the first dip recorded since 1945. Still, Americans’ debt levels have a long way to go to return to levels of 25 – 30 years ago. According to the Associated Press, American consumers today on average hold $44,000 in debt, including mortgages, credit cards, auto loans, and other consumer debt. Compare that to the $14,000 average per capita debt in the early 1980s, when unemployment levels were at similar levels as today. Credit card debt in particular has been on the rise over the past decades, as the advent of credit reports and credit ratings opened the playing field for a much larger number of consumers.
If you are one of the millions of American consumers feeling the pressure of mounting credit card debt, see the articles below for advice a few healthy credit card habits to help pare down your credit card debt and ease your mind.
11 Tips to Shrink Your Credit Card Debt
4 Tips for Dealing with High Interest Credit Card Debt
