Overwhelmed by Debt? You are not Alone

by Sam Burgoon on September 12, 2012

Unmanageable debt is an issue that many Americans face everyday. The economy has seen better days, and consumers have been forced to keep using several forms of credit to make ends meet (especially credit cards). This lending trend sometimes causes borrowers to lose track of their expenses by entering into never ending cycles of debt.

If you are deep in debt you are certainly not alone, as you can see in this infographic by the folks at Advantage Credit Counseling Service.

Total Consumer Debt

With consumer’s confidence remaining at low levels due to a hiring slowdown, people have been reluctant to take on new debt. This has affected credit card and mortgage accounts. The total U.S. consumer debt reported for May 2011 was of $2.43 trillion. The latest data on consumer debt sets it at $2.54 trillion, which shows an increase for the last 12 months period.

Total Revolving Debt

Revolving debt is made of 98% credit card debt. The current total U.S. revolving debt stands at $803.6 billion, an increase from the $793.1 billion reported in May 2011. However, latest figures show a slight decrease in credit card debt in comparison to previous months. Reports don’t track real estate type debt like home mortgages and home equity lines.

The U.S. economic recovery is still affected by slow progress in the job market, which has added fewer jobs than forecasted. With a current unemployment rate at 8.1%, the U.S. has faced 43 consecutive months of unemployment above the 8% mark. As consumers leave the job market, the Labor Department reports the longest period of high unemployment levels since the post World War II era. Experts suggest that this dire job market limits consumers’ willingness to take on new debt since job stability is risky.

Consumer Statistics

Here are some interesting figures about consumer credit based on surveys and government data:

  • Approximately 56% of people had an unpaid balance during 2009.
  • Around 16% of households only pay the minimum amount due on credit card debt on a monthly basis. This is based on data up to February 2007.
  • Over 30% of consumers mentioned that during some months in 2009, only the minimum amount was paid on their credit card accounts.
  • It’s calculated that 10,000 card payments are done worldwide per second as of 2009.
  • 60% of all purchases done by consumers is done in payment forms other than check or cash based on VISA USA 2006 reports.
  • 20% of consumers’ age 18-24 are facing financial hardship due to debt.
  • Surveys report that 28% of credit cardholders find making payments more difficult than before.

Consumer Spending

The Commerce Department reports that consumer spending has increased on a 1.7% annual rate, which is the slowest trend in a 12 months period. This is partially due to the consumer confidence decline in August 2012. As reported by the Bloomberg Consumer Comfort Index, the consumer confidence is at a minus 46.5 for the week ending in Sept. 2nd 2012, making it the fifth consecutive week of negative levels. Declines in consumer confidence are associated to extreme financial discontent. As such, consumer spending is affected since households are weary of the nation’s bad economy.

Statistic Revisions

Latest consumer credit records have been revised all the way back to December 2010 using surveys by finance businesses from 2010 and 2011, as reported by the Federal Reserve. These types of surveys are done on five-year cycles, which calculate lending practices to businesses and U.S borrowers.

For non-revolving debt such as auto purchases and college tuition, an increase was reported in July for a total of $1.55 billion. Light trucks and cars had a 14 million annual rate sales in July based on Ward’s Automotive Group estimates. Experts suggest that the increase in borrowing was aided by the high auto sales reported.

Federal government lending, which mostly covers college loans, has increased by $1.1 billion in July. Thanks to the approval of a bill to keep student loan rates at 3.4% instead of a scheduled increase for July 1st 2012, some 7.4 million students were able to save money on loan payments.

 

Many Americans are facing growing amount of debt since the start of the Great Recession in 2008. As debt grows, so does the inability to make payments on time, further increasing financial hardship. With borrowers looking for new forms of credit, affluent Americans lower their investments to protect against harsh financial conditions. Unless consumers start spending again, the economy will more likely remain in its recovery stage until the job market grows and the economy stabilizes.

About

Sam Burgoon is a social media marketing executive for several personal finance websites. He has a degree in business administration and marketing and has previously worked for companies like Bank of America and Oracle.