Are consumers taking steps to avoid a future that involves debt consolidation? The latest financial data suggest that they are. According to a recent story on the MarketWatch Web site, outstanding consumer credit dropped by $11.5 billion in February. That might mean that consumers, still leery of a sluggish economy, are putting fewer purchases on their credit cards. If consumers truly are being more careful in their spending habits, it might mean a slowdown in business for debt consolidation companies. Only time will tell, though, if consumers are truly committed to saving more and spending less.
A Nation of Spenders
The truth is, the United States has long been a nation of spenders. We are a consumer society. When we want something, we buy it, whether we have the money to pay for it or not. Has that changed because of the Great Recession? Maybe temporarily consumers will spend less. But how long will this last? In a society in which instant gratification rules, can we really count on U.S. consumers to keep their spending habits in check for long? We’ll have to watch the debt consolidation industry to see if their business spikes or drops as the economy recovers to know the answer to that question.
Less Spending For Now
There’s no arguing with the numbers now, though: Consumers are charging less. According to the MarketWatch story, consumer credit fell by 5.6 percent in February. This dropped outstanding consumer credit to a still sky-high $2.45 trillion. Outstanding consumer credit rose a bit in January, by $10.6 billion. But that increase came after 12 straight months of declining consumer debt. Overall, consumer debts are down a solid 5.2 percent from their peak in July of 2008. According to the story, revolving credit fell $9.4 billion, or 13.1 percent, in February. This marked the third-largest fall in revolving credit in the past 32 years. That’s pretty impressive. Other credit fell, too. This includes auto, personal and student loans, all of which fell by a combined $2.1 billion, or 1.6 percent, in February.
A Lasting Change?
It’s not surprising that consumers would try to spend less. After all, the national unemployment rate still stands near 10 percent. It’s wise to put the credit cards away when you’re not sure if you’ll be earning any income next week or next month. But as the economy improves, will we see consumers returning to their credit cards and, possibly, running up the revolving debts that lead many to debt consolidation? No one knows yet. But if history serves as a guide, you can expect those credit cards to return with a vengeance.