As the economic health of the country continues to falter and unemployment continue to rise, American consumers are having to adapt and change their financial habits. Credit card use among American consumers have noticeably slowed down and many are putting uncharacteristic effort to paying off their debts. Credit card companies are also sending lesser credit card solicitations and are much more lenient in their credit card applications.
Figures from 2005 show that banks sent around six billion credit card solicitations all over the country, which approximates to around 60 solicitations per American household. The figures have significantly dropped this year. This April, banks opened 6 million lesser credit card accounts than they did last April of 2008. The credit limits placed on the credit cards that banks have issued have also significantly been lesser than they were a year ago.
American consumers have also slowed down on their borrowing and are doing their best to pay off their current debts. American consumer savings are also increasing. For the year 2007, American consumers saved less than 1% of their income. Consumer debt growth also increased by the billions every month. Figures from May of this year show some drastic changes, however. Savings rate for American consumers increased to 7%. The figure is the highest it has ever been since figures from December of 1993. Outstanding credit card debt, although still quite large, has been falling consistently for eight months according to figures from the Federal Reserve.
Somewhat ironically, a number of lawmakers and economists are alarmed by the cutting down of credit by banks and by the continuing focus on savings and slowing down of spending of consumers. They see these developments as something that will impede the recovery of the economy. However, many see that what these lawmakers and economists are considering are only short term solutions. The best way to counter the economic downturn is to establish a solid foundation from which the country can build a long term sustainable growth for the economy. What the these lawmakers and economists are aiming for is the quick recovery of the credit bubble which was what led to the economic fall in the first place.
For many years, credit card holders had gone through a stage of promiscuous spending which led to the fast growth of debt among consumers. Credit companies, seeing this had also cashed in on the opportunity and had offered credit freely. When the economic downturn happened, consumers found themselves unable to pay off their huge debts and credit companies saw an alarming rise in defaults and write offs, which ultimately led the government to bail them out because they were on the brink of bankruptcy.
What consumers need now is to go back to the practice of smart spending and building up on their savings. The country can then build its economic recovery and growth on more solid ground as a result.