Forty-Six Percent of Americans Are Making Minimum or No Payments on Their Credit Card Balances, According To The Cambridge Consumer Credit Index

Furniture World Magazine

Almost half of Americans are making just minimum payments or no payments on their credit card balances, according to the Cambridge Consumer Credit Index. Of those surveyed who had revolving balances on their credit cards, 6% made no payments, 40% plan to make slightly more than the minimum payment, 37% expect to pay less than half the balance but more than the minimum, while 17% will pay more than half their balance. 44% of the respondents said they are incurring debt because they don't have funds to pay for the purchases in full, while 56% of Americans are incurring additional debt because they are confident of their abilities to pay off their balances in full when the bill arrives. 31% of respondents with credit cards extended their payments last month, while 43% paid off their balances in full and 26% did not use their credit cards at all. These findings are the result of monthly nationwide telephone poll of 1000+ adults conducted by ICR/International Communications Research in the past week, sponsored by The Debt Relief Clearinghouse. "The results of Cambridge Consumer Credit Index's March wildcard question indicate a large split among the haves and have-nots among American consumers. The haves are paying off their credit cards in full and are using their credit cards confidently to make purchases knowing they will be able to pay when the bills arrive. The have-nots are barely able to make their minimum payments-some 6% aren't even able to make any payments-and they are using their cards knowing they don't have the money to pay the bills when they arrive," says Jordan Goodman, spokesperson for the Index. These results are similar to findings from the March 2002 wildcard question, which found that of the consumers who revolve credit card balances, only 47% made minimum payments, 37% paid under half the balances and 3% made no payments at all. The overall Cambridge Consumer Credit Index increased by four points in March to 60. The "Reality Gap," which is the difference between the amount of debt consumers say they will pay off in the next month compared to the amount of debt they actually pay off a month later, fell from 20 points to 12 percentage points. A month ago, 81% planned to pay off debt, while a month later only 69% actually did so. According to Chris Viale, General Manager, of Cambridge Credit Counseling Corp, "It is alarming to see that many Americans are knowingly incurring debt they are not able to pay off. With the economy in turmoil, it is important for consumers to create a realistic budget and savings plan. Hard earned money should not be spent to pay high interest rates on credit card balances, but rather on a nest egg to fall back on." The Cambridge Consumer Credit Index is a forward looking economic indicator gauging consumer spending and debt. It is released on the fifth business day of every month to coincide with the Federal Reserve Board's G19 release of consumer credit outstanding data. In conjunction with the Index, the Cambridge Credit Counseling Corp., is releasing its monthly survey of people who have called in for credit counseling services over the past month. Cambridge representatives ask callers for the primary reason that they found it necessary to get help with their debts now. Of the 1208 people who answered, this was the order of their responses: 1. I am frustrated with high bank rates and fees (33.3%) 2. My income has been reduced from a lower salary, less overtime or layoff (23.8%) 3. I got into too much debt by overspending (13.7%) 4. I want to improve my ability to achieve future financial goals like buying a house or saving for retirement (11.3%) 5. My lack of financial education caused me to take on too much debt (5.7%) 6. Large medical expenses forced me to take on huge debts (5.4%) 7. Other reasons (4.1%) 8. My recent divorce or widowhood forced me to take on large debts (2.7%) For more information on the survey see http://www.cambridgeconsumerindex.com/camsurveyasp The Cambridge Consumer Credit Index number is a composite of these three questions: 1. In the past month, have you taken on more debt or paid off debt? The Index reads 62 on this question, unchanged from February. In March, 31% of Americans say they have taken on more debt, with 20% taking on a little and 10% taking on a lot more debt. Conversely, 69% of Americans have paid off debt, with 49% paying off a little and 20% paying off a lot. The reading is unchanged from February, when 31% of consumers had taken on more debt while 69% had paid off debt 2. In the next month, do you anticipate taking on more debt or paying off debt? The Index reads 42 on this question, an increase of 4 points from February. In March 21% plan to take on more debt, with 5% planning to take on a lot and 15% planning to take on a little debt. Conversely, 79% plan to pay off debt, with 61% paying off a little and 18% paying off a lot. In February 19% planned to take on debt and 81% planned to pay off debt, indicating that intentions to take on debt are rising. 3. In the next six months, do you expect to take on debt because you are thinking of making a major purchase such as a car, education, appliance, medical procedure, furniture or carpeting? The Index reads 76 on this question, an increase of eight points from February. In March, 38% of Americans plan to take on more debt to make such purchases, with 10% taking on a lot of debt and 28% taking on a little more debt. In contrast, 62% of Americans plan to pay off debt in the next six months, with 43% expecting to pay off a little and 19% expecting to pay off a lot. In February, 34% of Americans planned to take on more debt, while 66% planned to pay off debt. Intentions to make major purchases over the next six months have risen by 4 percentage points. "The Cambridge Consumer Credit Index rise of four percentage points in the past month indicates that consumers are being cautiously optimistic about the future while remaining conservative with their current levels consumer debt, " says Jordan Goodman, spokesperson for the index. The Index survey is conducted by ICR (International Communications Research) of Media, Pennsylvania over five days in the week before the Index is released. Over 1000 households are polled based on random-digit dialing, with all demographic and regional groups in America fairly represented. The Index has a margin of error of plus or minus three percentage points. For more information about the Cambridge Consumer Credit Index, contact media relations representative Paramjit Mahli at pmahli@cambridgeconsumerindex.com or 800-804-0575, or economist Allen Grommet, who provides an economic analysis of Index results, at agrommet@cambridgeconsumerindex.com or 800-804-0575, or the Index website at http://www.cambridgeconsumerindex.com/. Consumers wishing to find out more about Debt Relief Clearinghouse referral services should call 1-888-4DEBTHELP or visit http://www.debtreliefonline.com/ .