Credit card company executives liken the current economic climate to a “credit winter.”
They’re spending millions of dollars on marketing materials, only to have them ignored by prospective customers. Indeed, despite a scarcity of jobs, and very slowly growing income, Americans are saving more money now than since 1995 – the savings rate is around 5.7 percent – and are actually paying down credit card debt.
And even those consumers who are trying to obtain credit are finding it tough to lock it down, and when they do, the lines of credit are lower than in the past. Credit card companies extended just $77.7 billion in new bankcard credit lines in the first eight months of the year, compared to $93.8 billion in the first eight months of 2009 and $196.8 billion in the first eight months of 2008.
The amount of money consumers are carrying on their mortgages, retail credit cards, bank credit cards, auto loans and home equity lines of credit (HELOC) are all declining or holding steady, according to analytics provided by Equifax.
Total past-due credit card balances are lower year over. But while credit executives are seeing improvements in delinquencies, mortgage lenders say mortgage delinquencies are not improving.
Are consumers taking their savings and using it to pay down debts or at least make their minimum monthly payments? And, what will get Americans to start spending again?
Credit winter or not, Christmas is coming, and hopes are high for a terrific season for retailers that will help consumers erase the memory of the recent (and for some current) recession.
But it’s hard to see how consumers can spend all that much when the unemployment situation remains dismal. In this week’s unemployment report, numbers were up 2,000, to a seasonally adjusted 439,000.
According to the third quarter CredAbility Consumer Distress Index, only three states had a stable or excellent employment situation, including North Dakota, South Dakota and Nebraska. New Hampshire has a weakening employment outlook and virtually the rest of the country is in emergency crisis mode with regard to employment.
Consumer bankruptcy filings will hit approximately 1.6 million this year, higher than the 1.4 million filings last year.
Some economists believe there is a tremendous amount of pent-up demand from consumers. Maybe. Or, perhaps it’s just another wish for the Christmas list.
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