Nearly Half of Americans Planning to Cut Their Use of Debt Because of Stock Market Plunge, According to the Cambridge Consumer Credit Index
ISLANDIA, N.Y., Aug. 7 -- Almost half of all Americans (43%) are less willing to incur more credit card debt because of heavy losses in the value of their stock portfolios, while 57% claim not to be affected by recent market declines, according to the results of a nationwide survey by the Cambridge Consumer Credit Index. The highest-income Americans, earning over $75,000 a year in income, have been even more affected by plunging stock prices, with 47% saying they will cut back on their use of credit. These findings are the result of monthly nationwide telephone poll of 1000+ adults conducted by ICR/International Communications Research in the past week, sponsored by The Debt Relief Clearinghouse.
(Photo: newscom.com )
"Economists continue to ask if the consumer is going to stop spending because of the declines in the stock market. 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. This cutback in credit use will be even more pronounced among higher-income consumers who are the main drivers of the consumer economy because their portfolios have suffered the most," says Jordan Goodman, spokesperson for the Index.
In the month of August, the Index dropped by 7 points from July levels, meaning that more Americans are reducing and are planning to reduce their debt burdens. This plunge-the largest on record since the Index was launched in December 2001-- reverses a 12 point surge in June and July.
The Cambridge Consumer Credit Index is a forward looking economic indicator gauging consumer spending and debt. It is released on the fifth business day of every month to coincide with the Federal Reserve Board's G19 release of consumer credit outstanding data. In conjunction with the Index, the Cambridge Credit Counseling Corporation is releasing its monthly survey of people who have called it for credit counseling services over the past month. Cambridge representatives ask callers for the primary reason that they found it necessary to get help with their debts now. Of the 1586 people who answered, this was the order of their responses:
1. I am frustrated with high bank rates and fees (28%)
2. My income has been reduced from a lower salary, less overtime or
layoff (23%)
3. I want to improve my ability to achieve future financial goals like
buying a house or saving for retirement (15%)
4. I got into too much debt by overspending (11%)
5. My lack of financial education caused me to take on too much debt
(11%) 6. Other reasons (5%) 7. Large medical expenses forced me to take on huge debts (4%) 8. My recent divorce or widowhood forced me to take on large debts
(3%)
For more information on the survey see cambridgeconsumerindex.com
The Cambridge Consumer Credit index number is composite of these three
questions:
1. In the past month, have you taken on more debt or paid off debt?
The Index reads 66 on this question, a drop of 6 points from July.
In August, 33% of Americans say they have taken on more debt, with 22% taking on a little and 11% taking on a lot more debt. Conversely, 67% of Americans have paid off debt, with 44% paying off a little and 23% paying off a lot. In July 36% of consumers had taken on more debt while 64% had paid off debt, indicating that the number of Americans taking on debt is falling.
2. In the next month, do you anticipate taking on more debt or paying off
debt?
The Index reads 40 on this question, down by two points from July.
In August, 20% plan to take on more debt, with 5% planning to take on a lot and 15% planning to take on a little debt. Conversely, 80% plan to pay off debt, with 60% paying off a little and 20% paying off a lot. In July 21% planned to take on debt and 79% planned to pay off debt.
3. In the next six months, do you expect to take on debt because you are
thinking of making a major purchase such as a car, education,
appliance, medical procedure, furniture or carpeting?
The Index reads 62 on this question, a drop of 12 points from July, the
biggest one-month drop in the history of the index.
In August, 31% of Americans plan to take on more debt to make such purchases, with 9% taking on a lot of debt and 22% taking on a little more debt. In contrast, 69% of Americans plan to pay off debt in the next six months, with 48% expecting to pay off a little and 21% expecting to pay off a lot. In July 37% of Americans planned to take on more debt, while 63% planned to payoff debt.
The Reality Gap-which is the difference between what consumers say they will do in the next month and what they actually do, narrowed sharply from 17 to 11 percentage points. In July 80% of consumers said they planned to pay off debt in the next month, while 69% actually said they did so a month later. A month earlier, 81% of Americans planned to pay off debt but only 64% actually did.
"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," says Jordan Goodman, spokesperson for the Index.
For more information about the Cambridge Consumer Credit Index, contact Media Relations Representative Paramjit Mahli at pmahli@cambridgecredit.org or 800-804-0575, or economist Allen Grommet, who provides an economic analysis of Index results, at agrommet@cambridgecredit.org or 800-804-0575, or the Index website at cambridgeconsumerindex.com . Consumers wishing to find out more about Debt Relief Clearinghouse referral services should call 1-888-4DEBTHELP or visit debtreliefonline.com .
CONTACT: Paramjit Mahli of Cambridge Consumer Credit Index,
+1-800-804-0575, or pmahli@cambridgecredit.org
SOURCE: Cambridge Consumer Credit Index |
