July 8th, 2010
Is It Your Patriotic Duty To Borrow Credit?
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May marks the fourth consecutive month of continued decline in consumer borrowing, which means less consumer demand. With 70% of total economic activity attributed to consumer spending (Associated Press), Americans holding back on credit also holds back economic activity—all 70% worth. Granted, borrowing less on credit also means better personal savings and a marked decline in personal debt. But should consumers borrow more on credit to help our nation’s economic recovery?
The words “credit crunch” became a household phrase when it became the buzzword to describe the recession’s reduced availability of credit across the financial sector. Also known as the credit squeeze, American consumers are still feeling the pinch of tight credit as consumer credit fell at an annual rate of 4.5%, or $9.1 billion, in May, reports CNN Money.
This is the fourth consecutive month of declining credit in addition to disappointing retail sales since the beginning of the year. Though experts say that it’s not surprising that Americans are pulling back on spending, the credit crunch is still alive and well. The Associated Press reports that consumer borrowing fell in 15 of the past 16 months in the face of high rates of unemployment, a shaky housing market, and a volatile stock market.
Consumers borrowed less on revolving credit, such as credit card debt, with suffered a 10.5% drop. According to Credit Karma data, credit card debt decreased 1% in May to its lowest level in 2010. National credit scores remain stable as consumers keep debt down. Non-revolving credit, such are personal and car loans, also declined by 1.5%, or $1.82 billion.
What’s your take? How can consumers contribute to national economic growth and still keep their purse strings tight?