Fed survey focuses on recession: credit card debt drops, family wealth gets trodden
By Rick Murphy
Contributing writer for End the Lie
Debt is an interesting topic, especially in the United States, where debt collectors have been known to actually “invade” hospitals in tracking down healthcare debt.
Furthermore, the entire American monetary system is built upon debt and the American taxpayers have actually been forced to bailout the same bankers who continuously hold so many of us in debt.
A majority of the people live on low fixed incomes and fail to keep up with the rising cost of household expenditures, transportation, and prescription medicines.
It’s at this point of time that individuals turn to an incessant use of credit cards. No matter what the reason might be, the fact remains that one needs to pay off his or her credit card debts as soon as humanly possible.
Times are tough and it’s not really surprising to see people struggling to make their credit card payments. Under such situations, a credit card debt settlement program may prove to be quite useful.
According to a survey conducted by the Federal Reserve, a lot of consumers reacted to the recession by discarding credit cards and paying back their credit card debt.
The 2010 Survey of Consumer Finances shows that the number of people holding a balance on their credit cards dropped noticeably between 2007 and 2010.
According to the survey, nearly 39.4 percent of families stated that they had a minimum of one credit card with a balance on it, down 6.7 percent from 2007.
While this isn’t a staggering drop, it is significant because we’re seeing that less Americans want to stay in debt and beholden to the massive banks who can wield their debt against them.
The Federal Reserve said that the dwindled dominance of credit card debt was common and noticeable across nearly all of the demographic classes.
Nevertheless, not all groups get rid of their addiction to credit cards. The survey established the fact that families headed by somebody aged 75 or above was more inclined to hold credit card debt in the year 2010 than in 2007.
In the meantime, families headed by somebody without a high school degree also depended on credit cards more profoundly after the financial downturn.
On the basis of 6,492 interviews with U.S. consumers, the Fed’s Survey of Consumer Finances is one of the most widely acknowledged snapshots available of consumers’ funds.
Since the survey is conducted every three years, this is the first detailed survey that takes a look at how the U.S. citizens have used credit cards since the Great Recession occurred around 2008.
It has also focused on how distressing the recession was to household balance sheets. Thanks to the drop in value of many individual’s homes, the U.S. household’s mean net value dropped a whopping 38.8 percent between 2007 and 2010.
Furthermore, median earnings decreased for most individuals, with the highest fall in income maintained by highly learned families, families run by someone below 55 years of age, and families residing in the South and the West.
The report stated that household finances are influenced by both their individual decisions and the status of the still hurting economy. Between 2007 and 2010, the American economy went through its most sizeable decline since the time of Great Depression.
The survey showed how people have radically changed the way they used to use their credit cards. For instance, a large number of individuals have stopped carrying a balance on their credit cards.
This practice was more common among people with high incomes, and among younger or middle-aged erudite consumers. Again, credit card debt overall fell by a considerable amount.
For families carrying credit card debt, the mean value dropped by 7.8 percent, from $7,300 to $7,100.
The number of credit cards that families used also lessened. For instance, 32.7 percent of families used four or more credit cards in 2010, contrasted to 35 percent of households in 2007. A significant portion of the U.S. population stopped using their cards totally.
The number of individuals with store and gasoline credit cards fell considerably as well. Nevertheless, the number of individuals holding charge cards for journey or entertainment reasons (which don’t let you carry a balance) rose.
The survey also sheds light on the way individuals from different fields of life use credit cards. For instance, those who became conscious regarding the use of their credit cards after the recession consisted of families with higher earnings, nuclear families, families with no kids and families headed by somebody functioning in a professional, administrative, mechanical or sales-type jobs.
Individuals who kept on depending on cards, of course, were more expected to be families with kids and families with the lowest income scale. Households in the South, the Midwest and a massive portion of the metropolitan areas were more inclined to build up debt.
However, families in the Northeast were less prone to amass debt.
Rick Murphy is a writer associated with debtconsolidationcare.com. He is an expert in the debt industry and has contributed significantly to the public’s understanding of this sector through his various articles.