The recent unstable economic climate has had at least one positive effect on American consumers by causing them to rethink their financial plan, and learn how to lower spending, and reduce their credit card debt. The latest government statistics strongly suggest that that is exactly what this country’s citizens are doing.
The Federal Reserve has reported that nationwide, revolving debt, which consists of mostly credit card debt, was reduced close to 10 billion dollars or 13.1 percent in August. Credit card debt across the country was at a record high of 975 billion dollars in September 2008. Since that time, the total has been reduced to 899 million dollars. August was the 11th consecutive month that has shown this debt reduction trend.
Non-revolving debt, which includes auto loans, student loans, and personal loans, also reflected a much smaller drop than revolving debt in August. The Federal Reserve reports a decrease of 1.6 percent, a sharp decrease from July’s rate of 12.6 percent.
The government’s “Cash for Clunkers” auto program was hugely popular despite the consumer trend to reduce debt. The program encourages new car purchases to replace older, less economical vehicles. With higher gas prices and an overall trend toward reducing ongoing spending, many Americans have taken advantage of this program to cut the amount of money spent on a daily basis.
New student loans also contributed to the smaller drop in non-revolving debt. August is traditionally the month in which students begin or return to college and take out new student loans.
