Consumer credit statistics from 2006

Consumer Stats of 2006 - Latest Facts and Figures

By Sharon Secor

Direct Lending Solutions Staff Writer

Consumer statistics are among the strongest indicators used to measure the health of the economy as a whole, helping economists to predict and prepare for future financial trends. These facts and figures can be quite beneficial to individuals as well, offering a reference by which one can judge the financial health of their own household. With the importance of credit in today’s economy, a good working knowledge of where you rank in credit ratings and debt levels as compared to the average consumer can be a great tool towards achieving the most secure financial future for your family.

How Consumer Statistics Figure Into Your Finances

Most financial experts will advise consumers to restrict debt and spending to reasonable levels to ensure financial security. A consumer that devotes a high percentage of their income to servicing debt can be especially vulnerable to financial difficulties. An economic downturn or personal crisis, such as job loss, illness, or injury can be the financial undoing of a household that carries excessive debt. High levels of debt can also cost the consumer in poor credit ratings and steeper interest rates, raising the cost of using credit. However, it can be difficult for the typical consumer to determine exactly what amount of debt is reasonable in relation to their own income. Consumer statistics can make it easier for the consumer to make informed fiscal judgments, enabling the achievement of a proper balance of assets and liabilities for a sound financial future.

Federal Reserve Board Consumer Statistics

A variety of organizations and government agencies collect financial statistics on the spending and borrowing habits of the public. Among these studies is the Federal Reserve Board’s Survey of Consumer Finances, considered one of the leading indicators of the state of the American economy. Data for this study is collected and analyzed in three year increments, and reports are made available to the public.

The Federal Reserve Bulletin of 2006 states that while for most Americans income levels remained static when adjusted for inflation, the debt obligation of the same group rose by 26.3 percent, showing a general increase in the debt burden of the average consumer. During the reporting period reflected in this bulletin, 2001-2004, the interest rates were lower for most consumers than in the last study, spanning the previous three years.

During 2006, reports from the Federal Reserve reflect that outstanding consumer debt remained at a fairly stable level throughout the year at a figure of approximately $2.4 trillion dollars. This level of consumer debt averages out to nearly $8,000 in debt for every person residing in the United States, man, woman, and child. These statistics do not take mortgage debt into account. Approximately 36 percent of this figure is made up of revolving credit, such as credit card debt. The remaining 64 percent of that total consumer debt includes loans that are not revolving, auto loans or student loans for example.

The Federal Reserve breaks these consumer statistics down further in various reports released throughout the year. One such measure is the Household Debt Service Ratio or DSR. This measures the financial obligations of consumers against their disposable income. The latest statistics, released by the Federal Reserve in July 2006, show the DSR at 14.4 percent, indicating this amount as the percentage of income that is used towards mortgage and consumer debt combined.

Another statistic compiled and released by the Federal Reserve is the Financial Obligations Ratio, or FOR. This is a broader measure of the disposable income spent towards debt payments, including such items as auto lease payments, homeowner’s insurance, rental properties, and property taxes. According to the 2006 statistics, the Financial Obligations Ratio for homeowner’s averaged 18.06 percent and the figure for renters is reported at 19.23 percent of disposable income. This statistic is widely considered to be more accurate than DSR statistics in measuring the debt burden of consumers.

Consumer Credit Card Debt

Information compiled by the US Census Bureau shows the number of credit card holders in 2003 at 164 million, a figure that is expected to rise to roughly 174 million by 2008. Since the number of credit cards issued is reported at approximately 1.5 billion, this averages out to roughly nine credit cards owned by each of these consumers. These figures reflect credit cards of all types.

The amount charged on these 1.5 billion credit cards in 2003 reached is reported at roughly $1,735 billion, or slightly over $10, 500 in credit card charges. The amount of credit card debt carried by consumers during this period was approximately $786 billion, averaging out to roughly $4,800 in debt per card holder.

Of these credit card accounts, those with payments overdue by 30 days or more were reported at around 4.74 percent in 2005. Credit card delinquencies in this period reached the third highest level ever recorded. Bankruptcy filings in this period were estimated at more than 2 million, the highest level in history. A portion of these filings have been attributed to a consumer rush to file before the bankruptcy law changes of 2005 came into effect.

Using consumer statistics to evaluate the standing of your household finances as compared to the average consumer can be an essential part of maintaining financial security for your family. Accurate statistics on the average debt obligations of the general public can give you a means by which to measure your own progress, helping you to avoid the financial pitfalls that are encountered by many uninformed consumers.

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