April 08, 2010
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News: Americans Reduce Debt For 17th Consecutive Month
Americans continue to stand up to credit card companies as debt falls once again. The Federal Reserve released its report that demonstrates consumers are reducing credit card debt at an impressive rate. According to the report, revolving credit fell in February for the 17th month in a roll bringing the annual rate to 13.1 percent. Americans now owe $858.1 billion in credit card debt down $100 billion from fourth quarter 2008.
Consumers have replaced credit card spending with cash or debit as they send a strong message to lenders that they have had enough. The study showed that 42 percent of Americans have stepped up cash spending from same time last year. Debit card spending is also replacing credit card usage. MasterCard says that debit card use has increased by 10.5 percent for fourth quarter 2009 from same time the previous year. Visa reports 17 percent increase in debit card spending for its company.
High unemployment has also contributed to a reduction in credit card spending. The U.S. unemployment hit some of the highest numbers in decades as it topped over 10 percent. Experts say it will be a while before the unemployment rate shows any significant declines as the nation's housing market and automobile markets continue to suffer devastating losses.
Credit card companies have also played a role in the reduction of spending. In the wake of record breaking card delinquencies and defaults, lenders have slashed available credit, closed accounts, and took additional steps to reduce risks. Lenders have become more selective on who they extend credit to as well. The American Bankers Association reported that some evidence exists that banks' strategies to reduce risk has begun to take effect as seen by a moderate reduction in card defaults to 4.39 in fourth quarter 2009 from 4.77 percent third quarter. Most major banks have made it clear that they have no intentions of backing off any time soon.