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Federal Reserve: US Consumer Credit Card Debt Levels Falling

Created: On May 13, 2010 @ 4:33 pm In

The Federal Reserve’s G-19 report contains great news for consumers; U.S. consumer credit card debt is falling. Compared to the 4th quarter of 2008, when U.S. credit card debt reached a record high of $975.7 billion (yes, that’s billion), credit card debt levels for the past 18 months have fallen by 12.6% to approximately $852.2 billion.

Credit Card Debt: Analysts Cite Multiple Factors for Decrease

The [1] Gerson Lehrman Group cites multiple economic factors that contributed to falling credit card balances:

  • Consumers are using their debit cards: VISA and MasterCard debit transactions have surpassed credit card transactions since 2008.
  • Lower credit lines, fewer applications approved: Analysts pinpoint recent regulatory legislation as a main reason for credit card issuers approving fewer applications and offering lower credit lines. Coupled with consumer decisions to stop or reduce using credit cards, it’s no surprise that debt levels are falling.
  • Loss of home value and home equity: During the heyday of home equity lending, consumers could freely tap home equity loans and lines of credit for low cost debt consolidation. As property values have fallen, home equity lenders have tightened lending requirements and reduced credit lines. Homeowners are concerned about losing home equity and are cutting their spending.
  • High unemployment and underemployment: As U.S. unemployment rates remain near 10%, and with many jobs cutting hours, U.S. consumers are either struggling or are worried about losing their jobs. Ongoing high unemployment rates are causing credit card loss rates to hover near 10%; this is approximately double the loss rates for 2007. Analysts predict that high loss rates will prevail throughout 2010. Unemployment and related concerns are expected to cause further reduction in consumer credit card debt in the coming year.

Credit Card Debt: Making an Escape Plan

Although home equity lenders have tightened credit requirements, it’s worthwhile to check into getting a low interest debt consolidation loan. If you don’t own a home, but have excellent credit, you may qualify for an unsecured debt consolidation loan through your bank or credit union.

Bad Credit, Deep in Credit Card Debt

Recent economic conditions have caused many consumers to lose their good credit. Don’t be embarrassed by this; instead focus on achieving your [2] debt management goals. Non-profit consumer credit counseling and debt consolidation programs can help:

  • Sliding scale for paying for services: Non-profits offer free initial consultations and typically offer a fee schedule based on your ability to pay. Never pay for debt help up front.
  • Budget review and financial counseling: [3] Certified credit counselors review your income, debt, and household expenses and help you establish a cash based budget that includes saving and paying off credit card debt.
  • Negotiate with creditors: [4] Consumer credit counseling and debt consolidation services work with credit card companies to negotiate affordable debt consolidation and repayment plans. These plans can take several years to complete.

If you need help getting out of credit card debt, please contact consumer credit counseling services for assistance.

Article printed from DebtHelp.com Blog: http://www.debthelp.com/blog

URL to article: http://www.debthelp.com/blog/2010/05/13/federal-reserve-us-consumer-credit-card-debt-levels-falling/

URLs in this post:
[1] Gerson Lehrman Group: http://www.glgroup.com/News/Is-It-The-End-of-The-US-Consumer-s-Love-Affair-With-Credit-Cards--48326.
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[2] debt management: http://www.debthelp.com/kc/75-manage-your-debt-management-plan.html
[3] Certified credit counselors: http://www.nfcc.org/CreditCounseling/counseling_01.cfm
[4] Consumer credit counseling and debt consolidation services: http://www.debthelp.com/debt-consolidation/credit-counseling.html