Falling consumer credit card debt: Are we learning a lesson?
This week’s news brings interesting implications for consumer finances. First we learned that existing home prices have slumped to record lows, which has the media buzzing about the “new role” of owning a home. The new role is that our homes no longer function as limitless ATM machines. No more buying electronics, recreational vehicles, jewelry, and designer wardrobes with home equity loans and lines of credit. Under these circumstances, it appears that consumers would again turn to credit cards for the instant gratification of discretionary purchases. No way. Americans may finally be getting the message about the high cost and consequences of carrying high credit card debt.
Federal Reserve: Credit card debt decreases for 21st consecutive month
The Federal Reserve reports that credit card debt levels are continuing to fall, and that average credit card debt for individuals has fallen to $4951 as of June 30. This is the first time since 2002 that average consumer credit card debt has fallen below $5000. This is a trend worth continuing. Although recent legislation helps consumers in some ways by limiting credit card fees and requiring credit cards to notify customers in advance of arbitrary rate increases, many credit card companies are raising interest rates to recoup the income they’re losing due to caps on penalty fees. High cost debt is a particularly heavy burden during times of economic uncertainty.
Debt consolidation and credit counseling services provide help, support
Debt consolidation through a home equity loan or personal debt consolidation loan is often a first step to gaining control of credit card debt. What if you can’t borrow against your home or can’t qualify for debt consolidation loans? In situations where you can’t qualify for debt consolidation loans, a consumer credit counseling service may be able to help. These agencies act as a credit card debt consolidation service without loaning money. Instead, consumer credit counseling services offer debt consolidation and additional benefits:
- Reviewing your finances and developing a cash based budget
- Designing an affordable credit card debt repayment plan
- Negotiating with creditors to lower or eliminate finance charges and fees (based on need)
- Communicating with creditors on your behalf, which usually stops harassing calls to you, your home, and your work
- Administering your debt repayment plan for a low monthly fee, often based on ability to pay
- Avoiding bankruptcy through financial counseling and affordable debt repayment
Don’t put off taking “charge” of your credit card debt a moment longer. Contact a credit counseling service for debt help today.
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Loading ...Almost Half of Americans Are Stressed about Debt
Almost half of Americans are stressed about debt. A recent Associated Press-Gfk poll found that 46% of people surveyed are dealing with stress related to debt. Half of those people said they have “a great deal” or “a good bit” of stress. The poll found that 53% of Americans felt little or no stress about debt.
Job Security
Among the reasons that may contribute to stress related to debt is the fact that the unemployment rate is at 9.9%. Many people who currently hold jobs fear they could end up joining the ranks of the unemployed. Some households have tightened their belts, which has helped increase the personal savings rate to 3.6% in April, up from 3.1% a month earlier.
Get Debt Help If Needed
You may be among those who are stressed about credit card debt and other bills, and may be wondering what the future holds, especially if you have little savings. There are debt solutions available to help pay off what you owe. A debt counseling firm can work with you to improve your spending habits and budget money better to pay off credit card debt.
Debt Consolidation Help
Another way to get on track with a debt reduction plan is to put together a debt consolidation plan. With the help of a knowledgeable debt counseling firm you can put together a consolidation plan on your own. But if you need more help, there are debt consolidation services available. Just be prepared to pay fees for this help.
Yes, it is stressful to juggle a lot of debt. Take action now to nip your debt woes in the bud before they become even more unmanageable.
(No Ratings Yet) Loading ...As if the economy was already not struggling enough - with the gas prices sky rocketing and the stock market continuously taking a dip, the recent unemployment numbers punched another hole. The unemployment rate had increased to 5.5% in May from the previous 5%. According to the Labor Department, this marks the fifth month of a decline, with a loss of 49,000 additional jobs in May.
There were 8.55 million people who were unemployed in May and of those, 1.55 million had been unemployed for a period of 27 weeks or longer. Under the current regulations, federal unemployment benefits expire after 26 weeks of unemployment. However, that may change in the near future as a current bill that has been approved by the Senate and is awaiting a vote in the House would add an additional 13 weeks of cash assistance.
This news comes during the policy debate in Washington regarding supplementary Iraq war financing bill. The unemployment numbers also cooled the speculation that the Fed may try to start slowly increasing the interest rates in an attempt to control the rising gas and food prices as well as provide additional support to the already weak dollar. The next Fed meeting is scheduled for the end of June and there is already plenty of speculation for what the next move by Bernanke may be.
As the Fed continuously lowered interest rates for the past 6 months, there was speculation that the economy was stabilizing and the banks were past their worst mortgage woes. However, these labor statistics and other economic indicators paint a very different picture.
What first started as a mortgage crisis has managed to touch all aspects of the economy. As the homeowners were experiencing financial difficulties, they cut their spending - which in turn impacted the sales in the shopping malls, grocery stores, and in the general home improvement category. This decrease in sales forced many businesses to cut payrolls. The business categories that have been hit the hardest include construction, professional and business services, manufacturing, transportation and warehousing, and of course retail.
Although there does not seem to be a bright light in the near future, US is still not considered to be in a recession, at least in accordance with the recession definition. How much worse can this get before we officially hit “recession”?
(3 votes, average: 4.67 out of 5) Loading ...Jobs Number Misleading if You Read Between the Lines
By Jim Perez,
DebtHelp, Inc. Staff Writer
In the Bizarro World of Wall Street, where the market goes up on bad news, and good news hurts investors, today’s Labor Department report that U.S. payrolls grew by a net 166,000 jobs, lifted the Dow.
Well, sort of.
The Dow Jones Industrial Average ended the day down 54 points, a paltry drop compared to the 360-point dive the day before.
Labor also reported that the unemployment rate stayed the same, at 4.7 percent, a figure considered low by historical standards.
But of course, this good news is tempered by other data contained in the rest of the report, says Dean Baker, of the Center for Economic and Policy Research.
Baker notes that the employment rate dropped to 62.7 percent, the lowest since June of 2005. He says this drop is especially discouraging, continuing a decline that began at the end of 2006. The employment to population ratio has dropped by 0.6 percentage points over this period.
He continues with the bad news, saying that despite October’s healthy job growth numbers, the private sector has generated an average of just 78,000 jobs over the last three months. Not very encouraging.
And the hourly wage growth has slowed down to an anemic 3.57 percent annual rate over the last quarter. This is down from a rate of more than 4 percent earlier in the year.
Even that 4 percent growth pales in comparison to the real, double-digit inflation that the Bureau of Labor Statistics has hidden in its 24-year shell game.
Baker says these numbers show a weakening labor market, and predicts more doom and gloom on the horizon as the housing market continues its slow, steady death march.
(No Ratings Yet) Loading ...Labor Bureau’s numbers racket takes consumers on 1-way ride
By Jim Perez,
DebtHelp, Inc. Staff Writer
Please don’t shoot the messenger.
I am not a doomsday prophet, merely a chronicler of economic events.
But I do have to say that after writing about economic events these past few months, sometimes I feel like grabbing a gun.
But which messenger I’ll be aiming at, I won’t be saying.
For example, despite Wednesday’s 137-point rise after the Fed cut interest rates a quarter point, the Dow on Thursday took a 360-point drop. I haven’t seen a roller coaster ride like this since I visited Magic Mountain, near Los Angeles, a few years ago.
I’m sure many individual investors wish they could get off this ride.
I know I do.
As for some fund managers, I’m sure many of those same individual investors would like to take those managers for a one-way ride.
Thursday’s drop was attributed to the Fed’s warning that Wall Street’s interest-rate-cut gravy train is running dry because the Fed is concerned about inflation.
If inflation continues to grow, the Fed might, Gasp! raise interest rates. Alan Greenspan would be rolling in his grave at the thought, if he were dead.
Adding to inflation worries, overnight oil prices topped $96 a barrel before crude traders scavenging for profits caused oil to drop. Predictions of $100 a barrel are now even-money bets.
Hammering at Wall Street even more, the Commerce Department said that consumer spending slowed in September, rising by 0.3 percent, slightly lower than the 0.4 percent increase that analysts had been expecting. Incomes matched August’s gain of 0.4 percent, in line with forecasts.
Inflation news from the consumer spending report was good, as usual.
The Fed’s preferred inflation gauge rose a moderate 0.2 percent in September. This measure is up 1.8 percent over the past 12 months, inside the Fed’s comfort zone of core inflation increases between 1 percent and 2 percent.
The Fed’s preferred inflation gauge excludes food and energy.
Nor is housing a concern for the Fed.
But if you are an average consumer, it is.
And as the housing market continues to slide, foreclosures being up 30 percent at the end of 2007’s third quarter, double the same period in 2006, more and more people are joining us in the ranks of average consumers.
The Economist magazine agrees with some, including me, who say that the Fed’s inflation-sleight-of-hand is stroking Wall Street and slapping Main Street.
The magazine says that an average of “all items†is going up not at 2 percent or 3 percent per year as the U.S. Bureau of Labor Statistics claims, but at 16.7 percent per year. Food is going up even faster – 31.6 percent.
Treasury Secretary Henry Paulson continues to tell us the dollar is strong.
I don’t know about you, but I’m having trouble living with Paulson’s “strong dollar.†I can only imagine what it would be like if the dollar were weak in Paulson’s eyes.
Strategic Investment’s Dan Amoss says that, “With each new release of economic indicators – the consumer price index, the new employment numbers, trade deficits, gross domestic product and more – every number, bad or not so bad, is contorted into ‘happy speak’ by the talking heads responsible for keeping the good times rolling.”
Amoss continues:
“Just imagine how great your family budget would look if you didn’t have to include your mortgage payment, the gas to run your car, your heating bill or the weekly grocery bill. You’d probably feel pretty rich, too. But reasonable people know you just can’t ignore these bills without some pretty serious consequences.
“In addition to excluding the above three, the Fed also plays a cool sleight of hand with the prices it does include. For example, we all know that a computer is twice as capable as one from five years ago, but costs about the same price. But the Fed goes ahead and adjusts the price downward to contribute a 50 percent decline in price in the CPI.
“So if you were to take out the adjustment tricks, inflation would probably run 3 or 4 percentage points higher than what the government will admit. Just think how fast an 8 percent inflation rate can eat into savings and investments.”
Of course, if banks were paying a reasonable return on our savings, because bond traders and investors demand a 2 percent return after inflation, this would mean that bond and money-market yields could climb into the double digits.
Imagine getting a double-digit return on a bond or money-market fund.
As I said a few weeks ago, that’s unthinkable:
Having to pay a high return to common folk investors such as us would cause the salaries and bonuses of bank and fund managers to drop below the $10 million mark.
(No Ratings Yet) Loading ...Consumer Confidence Drops Again - Economy Roundup
By Jim Perez,
DebtHelp, Inc. Staff Writer
U.S. consumers are getting even more leery of the economy, as consumer confidence dropped in October for the third straight month.
The Consumer Confidence Index, based on a sample of 5,000 U.S. households, dropped to 95.6, down from September’s 99.5. The index hasn’t hit these depths since October 2005, when it sank to 85.2.
Adding more woes to the economy as the Federal Reserve meets to discuss a possible rate cut, Standard and Poor’s Case-Shiller survey showed home prices in 20 major U.S. metropolitan areas fell 4.4 percent from August 2006 through August 2007, the steepest drop since 2001, when the survey began. The survey is considered more accurate than comparable government reports and offers investors more evidence that the housing sector is sinking to depths not seen since the early 1990s.
In its Consumer Confidence Index survey, The Conference Board Consumer Research Center reported that the percentage of consumers surveyed in October who said present conditions are “good” sank to 23.4 percent from 25.7 a month ago; the percentage who called conditions “bad” dropped to 16.3 percent from September’s 17.8 percent.
Consumers were even less upbeat about the job market, with 22.6 percent of respondents saying jobs are “hard to get,” up from 22.4 percent in September. People who said jobs are “plentiful” in October decreased to 24.1 percent from September’s 25.6 percent.
The percent of consumers expecting more jobs in the upcoming months remained at 13.5 percent in October, while those anticipating fewer jobs increased to 20.1 percent in October, from 18.7 percent in September. The proportion of consumers expecting their incomes to increase in the months ahead declined to 19.6 percent from 20 percent.
And as retailers gear up for the Christmas shopping season, consumers appear to be ready to scale back for the next six months.
The Present Situation Index, which measures how shoppers feel now about the economy, declined to 118.8 in October from 121.2 in September. The Expectations Index, which measures shoppers’ outlook over the next six months, declined to 80.1 from 85.0.
October’s Consumer Confidence numbers show 13.8 percent of consumers are expecting business conditions to worsen through April 2008, up from 11.9 percent in September. The number of people who think business conditions will improve declined to 13.7 percent from September’s 15.7 percent.
(No Ratings Yet) Loading ...Random Tax Audits Show Massive “Tax Gap” of $345 Billion
By Jim Perez,
DebtHelp, Inc. Staff Writer
If you’re one of the lucky individuals who got a note in October from your friends at the IRS, don’t feel special, you’re not alone.
This October the Internal Revenue Service sent out about 13,000 random “Dear John Q. Taxpayer letters,†informing some taxpayers they’ve been selected for a special audit by the IRS.
The 13,000 random taxpayers chosen this year, with similar numbers to be picked in upcoming years, are part of the IRS National Research Program.
The program is designed to give the IRS a better understanding of how accurately income and deductions are reported, and to reduce the “tax gap.†The tax gap is the difference between what taxpayers should have paid and what they actually did pay.
The tax gap is a growing concern because it’s gotten so big.
In 2001, the IRS analyzed about 46,000 individual tax returns and found a $345 billion shortfall in tax monies. After enforcement actions and late payments, that shortfall was cut to about $290 billion, still no laughing matter to the tax collection agency.
The IRS will use information gleaned from the special audits to help it update criteria for selecting tax returns for annual compliance audits. Last year, nearly 1.2 million taxpayers were audited, the IRS said. A smoother functioning audit system will help the agency work more efficiently and cut the odds of going after tax-abiding citizens.
Some of the noncompliance stems from taxpayers not paying what they calculated they owe in taxes. Or not filing at all.
But the biggest problem, about 80 percent of the tax gap, comes from underreporting, the IRS says. This includes people working in restaurants who might underreport tip income, or sole proprietors who take business deductions for personal expenses.
The IRS concedes some mistakes are accidental, but notes that it has to watch out for intentional underreporting or even criminal activity.
Waterboarding is NOT one of the remedies being considered in upcoming years to improve voluntary tax compliance rates.
(No Ratings Yet) Loading ...Americans Turn Negative on Economy
By Jim Perez,
DebtHelp, Inc. Staff Writer
Against the orchestra of fiddles being played by President George Bush and the rest of his administration, an overwhelming majority of average Americans believe that the backflash from the once sizzling U.S. economy is now torching their wallets.
A just-released Bloomberg/Los Angeles Times survey shows 65 percent Americans say they expect a recession, with only 29 percent saying they don’t.
And 51 percent of those polled say the economy is doing poorly, compared with 46 percent who say it is doing well. This is almost a 180-degree turn-around from June, when 57 percent of respondents said the economy was doing well. This is the gloomiest view from the homefront since February 2003.
The poll bolsters results from the Reuters/University of Michigan Surveys of Consumers. The late October figure on consumer sentiment was 80.9, down from September’s final reading of 83.4. The 80.9 October figure was the lowest reading since May 2006, when it hit 79.1.
This one-two punch of bad news sets the stage for the Federal Reserve next week when it meets to decide whether to cut rates to try and head off the recession people fear is on the horizon.
The poll also hammered another nail in the GOP coffin: By 44 percent to 33 percent, Americans say Democrats would be better than Republicans at jumpstarting the economy, if a recession does hit.
Even the wild card that the GOP plays so well against the Democrats during election seasons, the anti-tax card, appears to be trumped: Nearly 66 percent say they haven’t benefited from the tax cuts Dubya rammed through Congress during his first term.
A majority of respondents oppose the tax plans being pushed by the leading Republican presidential candidates. Those plans are to cut taxes on corporate profits and maintain lower rates on investment income.
Fewer than half polled said investment income should be taxed at the same rate as wages. The rate on capital gains and dividends is now 15 percent, less than half the 37.9 percent top rate on wages and salaries. About 16 percent said investment income tax rates should be raised, while slightly more favor keeping those rates lower than earned income.
All of the major Republican presidential hopefuls have committed to maintaining the lower rate on investment income. Former Massachusetts Gov. Mitt Romney has proposed eliminating the tax for middle-class Americans.
By a 52 percent to 36 percent margin, respondents favored health and education spending as a better economic stimulus than tax cuts.
And a majority of Americans say they would tolerate higher taxes to help pay for universal health care. And about 60 percent of respondents said they would be willing to repeal tax cuts to help pay for a health-care program that insures all Americans.
Democratic presidential candidates Hillary Clinton, a New York senator, Illinois Sen. Barack Obama and former North Carolina Sen. John Edwards back the idea.
Most of the highest income group polled, those in households earning more than $100,000, support the plan. About 80 percent of Democrats like the plan while most Republicans oppose it.
The Oct. 19-22 poll of 1,209 adults had an error margin of plus or minus 3 percentage points.
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.
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