Consumers are continuing to pay down their debt, which brings up the question: Will as many have to consolidate debt now that saving money and paying down credit card balances seem to have become new trends? It would seem logical that a growing number of consumers would need debt consolidation programs as the national economy continues to struggle. With unemployment high, it’d make sense that consumers would be running up more debt on their credit cards. Instead, the opposite seems to be happening. Consumers are acting frugally. They’re putting off purchases that they can’t afford, purchases that in the past they would have put on their credit cards. It seems the Great Recession may have taught the typical U.S. consumer a bit about the value of savings.
New Debt Numbers
The Federal Reserve reported in early July that total outstanding consumer debt, not including mortgage loan debt, fell $9.1 billion in May to $2.41 trillion. That marks the 15th drop in consumer debt in the last 17 months, according to the Federal Reserve Board. In all, consumer debt has plummeted by $146 billion since 2008 ended. That’s a drop of 5.7 percent. This news comes as a surprise to many; after all, U.S. consumers have long been known for their willingness to run up large amounts of debt. They haven’t been known for patience or for saving money to make purchases later. This is a new attitude, then, by U.S. consumers, one brought about by the worst recession most of them have seen.
Debt Consolidation on the Decline?
You’d think that companies that help consumers consolidate debt or that provide debt consolidation counseling would be thriving today. It’s true that many consumers still need to consolidate credit card debt and that many are still seeking unsecured debt consolidation programs. Business is always steady in the debt consolidation industry. But business isn’t exploding as many financial analysts predicted that it would. The Great Recession, it seems, has brought out the hidden frugality of a growing number of U.S. consumers.
The Consequences of Debt Consolidation
This is good news for consumers. Taking steps to consolidate debt is often the right move for consumers struggling with overwhelming credit card debt. However, unsecured debt consolidation does come with its own negatives. It will cause consumers’ credit scores to fall, sometimes dramatically. And debt consolidation programs are rarely cheap; most companies that provide debt consolidation services charge high origination fees and interest rates for their loans. That’s why it’s encouraging to read that many consumers are taking steps to make sure that they never have to resort to debt consolidation to handle their credit card bills.