Thursday, October 05, 2006
Credit card debt down 11.4% in U.S.; But bankruptcies, not money
A new survey says the average U.S. consumer carried 11.4% less credit card debt this year, but industry experts say it might not be entirely because people were thriftier.
Myvesta, a Rockville, Md., consumer education organization, said Thursday that its annual survey, conducted in early November, showed the average American had a credit card balance of $2,328, down from $2,627 in 2004.
The survey also found the average consumer had about three credit cards in his or her wallet, the same as in 2004.
It's hard to say exactly why the survey shows smaller credit card balances, those involved with consumer debt and counseling say. It might be a reflection of a healthy economy, said John Penn, president of the American Bankruptcy Institute.
"It could be that unemployment is down, people had jobs and they didn't charge up as much as they might have otherwise," Penn said.
Hard to explain
"It's very difficult to put one's finger on exactly why or how this happened," said Nick Jacobs, a spokesman for the National Foundation for Credit Counseling.
Jacobs said that while the survey's findings were "a little out of step with others that we've seen," it may be a sign that consumer education efforts by his group and others are having an effect.
Some say the huge number of bankruptcies this year may have skewed average credit card balances downward because bankruptcy wiped big amounts of consumer debt off the books.
Indebted consumers, fearing that a change in bankruptcy law in mid-October would make it harder to have their financial obligations erased in court, filed what will turn out to be a record number of bankruptcies in the U.S. in the calendar year 2005. In its fiscal year ended Sept. 30, U.S. Bankruptcy Court recorded almost 1.8 million bankruptcy filings, a record.
As for Wisconsin, 38,039 bankruptcy petitions had been filed through November in the state, which broke the full-year record of 28,246 set in 2003.
Kathryn Crumpton, manager of Consumer Credit Counseling Service of Greater Milwaukee, said the "bumper crop" of bankruptcies probably affected the per-consumer credit card balance averages.
"We sure aren't seeing people with less debt. My goodness, no," Crumpton said.
Losses 7% in October
CardWeb.com, which monitors the payment card industry, said losses by card issuers topped 7% in October, mainly because of the wave of bankruptcy filings that preceded the change in the law.
The Myvesta survey a random telephone survey of 1,000 people from Nov. 4-6 found that males had more average credit debt than females, $2,369 to $2,289. People in the Midwest carried the smallest credit card balance, $1,972. Consumers in the West carried an average credit card balance of $2,547, the highest in the survey.
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