Federal Reserve: U.S. households reducing consumer debt

September 26, 2011
By Karen Lawson

The Federal Reserve reports that U.S. household debt fell from 116 percent of disposable in the first quarter of 2011 to 114.6 percent of disposable income in the second quarter. This is good news in terms of U.S. household reducing their debt, but Reuters notes that debt levels above 100 percent of disposable household income have not occurred since 2002 until the current economic downturn. While paying down consumer debt unburdens Americans from financial uncertainty, Using funds for paying down debt likely means that Americans are continuing to keep their wallets closed except when they’re paying bills.

Using credit card debt consolidation for saving

Consumer saving accounts are paying microscopic yields these days, and consumers are learning that paying off credit card debt carrying double digit finance charges makes more sense than contributing large amounts to savings. Maintaining an emergency fund is important, but paying off high cost credit card debt saves money on finance charges and frees up credit lines for an actual emergency as opposed to the “retail therapy” sessions causing your credit card balances to rise to Himalayan heights. Add on the interest rates, membership fees, and penalty rates and fees associated with most credit cards, and your financial misery can quickly ascend to levels resembling the realm of space travel.

Stratospheric credit card debt?  Taking steps to regain sound footing

In circumstances where you can’t afford to make minimum payments on your credit card debt, discuss your situation with a credit counseling agency. These organizations offer low cost credit card debt consolidation options and budgeting assistance. Although you’ll be required to close all of your credit card accounts when using a credit card debt consolidation plan offered through a credit counseling service, paying off your debt faster and with far less expense makes the sacrifice of your “platinum”, “gold” and “titanium” credit cards an easy choice. After all, credit cards are only plastic, and finding debt relief is priceless.

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