Consumers cutting back on debt
In response to bear market, they're tearing up the plastic
By Rex Nutting, CBS.MarketWatch.com
Last Update: 10:26 AM ET Aug. 7, 2002
ISLANDIA, N.Y. (CBS.MW) - Nearly half of American consumers say they'll cut back on their credit use because of heavy losses in their stock portfolios, according to a monthly survey on credit card use.
Stocks maintain gains after improved Cisco results
Cisco shares hold ground in early action
Aon, Cross Country, United Online, and more
Fed chief Greenspan to be knighted by Queen
Forty-three percent of consumers surveyed said they are less willing to take on new debt because of the bear market, while 57 percent say their credit use hasn't been affected by the market, according to the Cambridge Consumer Credit Index.
As expected, upper-income households -- those earning over $75,000 a year -- were more likely to say they'll tear up the credit card after looking at their portfolios.
"Consumers are clearly concerned by the current economic and stock market environment, and are taking action to cut their debts and curtail their spending in response," said Jordan Goodman, a spokesperson for the index, which is sponsored by the Debt Relief Clearinghouse.
Later Wednesday, the Federal Reserve will release the June consumer credit figures, which include all non-mortgage consumer debt. Economists expect debt rose about $7.9 billion in June after a $9.5 billion gain in May.
"Economists continue to ask if the consumer is going to stop spending because of the declines in the stock market," Goodman said. "Now we have the answer: nearly half of Americans do plan to sharply reduce their use of credit because they have suffered such enormous losses in their portfolios in recent months."
The Cambridge index fell to 56 in August from 63 in July, which indicates that consumers are less willing to take on new debt.
In August, 33 percent of consumers said they had taken on more debt, compared with 36 percent in July. Just 20 percent say they plan to take on more debt next month, down from 21 percent in July.
Over the next six months, 31 percent say they'll take on debt to finance a major purchase, compared with 37 percent in July.
Rex Nutting is Washington bureau chief of CBS.MarketWatch.com. |
