Consumers shied away from credit card debt in February, according to the Federal Reserve's G.19 report, which was released Tuesday afternoon. Consumers are now carrying some $2.56 trillion in consumer debt, a drop of $7.5 billion, or 3.5% from a year ago.
From the Wall Street Journal:The February credit drop of $7.5 billion was bigger than what Wall Street expected, which was a $1 billion decline. It was the fourth decline in six months.
The Wall Street crisis and recession have made it harder for consumers, and businesses, to borrow money. The Fed last month rolled out details of a Term Asset-Backed Securities Loan Facility to loosen credit and relieve the economy.
The consumer-credit data exclude home mortgages and other real-estate-secured loans. These tend to be highly volatile from month to month and are frequently revised.
Read the rest of the story here (link).
Read the Fed's G.19 report here (link).
Tuesday, April 7, 2009
U.S. Consumer Credit Drops By $7.5 Billion In February
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19 comments:
Hooray! I think this is GREAT news!
Credit-card debt shrinks at fastest pace in 32 years
http://www.marketwatch.com/news/story/credit-card-debt-shrinks-fastest-pace/story.aspx?guid={98497170-84DD-4CC0-B23B-DEE0730E1BC9}&dist=msr_2
1 - The economy can't get better until people start borrowing again.
2 - People can't start borrowing again until the economy gets better.
3 - Continue vicious cycle for how long?
I'm betting that it was more like consumers were forced away from debt than most consumers voluntarily staying away.
Not a bad thing in by itself, but it doesn't exactly strike me as warm fuzzies either.
Right, azntg. One way or the other, though, debt fell. But perhaps some of it has to do with all of these limit cuts. Restricted access makes it difficult to ramp up debt.
I think the drop was caused by a combination of (1) less credit available (2) persons like me who are fed up with being in debt and trying to dig their way out.
By the way, when I do buy, I'm reading more labels looking for items made in USA.
b_in_sc
How is this number counting Charge off's?
Tim, not sure. I just looked at the G.19 report and I do not see a note about charge offs.
I personally think alot of the drop is due to people not willing to pay 15 - 28 percent interest. I know I have paid my accounts down to zero since I am not going to give them 15% interest. -- Don
The economy is not going to recover until balance sheets both household and otherwise start to improve, so this is a move in the right direction regardless of the reason.
Once the debt starts to get paid off it will free up some money for other things.
I guess I was not approved for my comment since it said "will not be visible until approved".
Don
Don, a few days ago I started moderating comments over night. I was getting too much commercial spam. Then I have garbage that my readers are clicking to (debt repair, scams, etc.). Decided, since my over night posting traffic is not heavy, that the balance tipped in favor of moderating.
In the morning I release all of my comments. I reject all of the spam comments -- and no one ever sees them.
Just an update.
I am the guy who was 24,000 in credit card debt as of August of 2008. I recently sent in another check for $7000 dollars to get rid of my chase credit card lowering my total debt to 10,000 while still keeping 5,000 in an emergency fund.
So for those negative people here who said I would get bored of paying off my cards and go back to my debt strapped ways and to get back to you when I pay them off... Just doing what I Promised.
$10,000 dollars to debt freedom, $5000 in the bank. And there is no stopping me now.
The only thing I purchase is essentials for the past 6 months and I am happy as ever. I hope everyone in the US stops spending money using debt and the economy collapses forcing it to be based on manufacturing again instead of GDP based on spending money that we don't have.
Chris, not sure who was poo-pooing your plan, but I'm here to tell ya to keep on going! Congrats on your progress.
Great plan Chris and if your plan is working for you, then that is all that matters!!!
I do believe people are tired of compiling debt. This credit crunch can be seen as a blessing in many instances as we really see what the banks will do for us in an downward spiral----- Slashing credit limits without warning, closing accounts, and getting bailouts with taxpayers money and not giving an account of what they did with the money lets us know just how favored we are LOL.
We're saving more and spending less and it really does feel good for a change. "Debt is dumb and cash IS king!" Dave Ramsey I agree. The paid off mortgage will be next.
CiifIcare
Azntg I think it's a combination. Customers have heard so much about adverse action they aren't using their cards. In the end the banks were probably hoping for a 70% reduction in exposure but assumed the remaining 30% would use their cards normally. What they are finding out is the 30% are running for the hills.
Chris, congrats to you for working hard on getting out of debt.
What I hope that everyone learns from this after everything is that you shouldn't be spending tomorrows money today. Credit is great if you use it to your advantage but when you don't it is hard to breathe when you get into to much debt. I for one love cash back but I don't want to pay any interest.
This time last year I had $115,000 in credit card debt. Today I'm at $45,000. That is $70,000 paid down in a year. I bet I alone skewed the average for about 100 other card holders :D. By the end of this year I will be 100% debt free and will be done with banks permanently. The high debt load was all my (and my ex-wife's lawyer's) doing but I can and have always paid every dime I ever owed anyone in my life. The sneaky, underhanded, unscrupulous, downright dishonest tactics the banks have pulled and tried to pull over the last year have put me off of them forever. I no longer even care if they cut my credit limits and I will not hesitate for a second to close my accounts to opt out of any rate hikes. I wont be bringing my business back ever. It's cash and credit unions from here on out.
"Chris, not sure who was poo-pooing your plan"
I think I made a comment, but it was not really poo-pooing his plan. Just noting that most people do not follow threw with it. So, one should wait to brag until they've paid it down to $0.
"I hope everyone in the US stops spending money using debt and the economy collapses forcing it to be based on manufacturing"
If the economy collapses there is no reason why it would force it to be based on manufacturing again. Less and less people are going to be employed in manufacturing going forward, AI and robotics will see to it.
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