FORT LAUDERDALE, Fla–In the face of high unemployment rates and slow growth, consumers have swiped their credit cards much less than in previous months. According to the Federal Reserve, credit card debt fell to $850.7 billion in July, down from $858.8 in May.
Total consumer borrowing also dropped by $3.3 billion to $2.705 trillion in July, marking the first decline since August 2011.
These figures suggest that consumers remain cautious about spending as a result of the economic crisis. But the economy is not the only reason consumers are holding back; many are spending less because they are learning the benefits of living within their means. Instead of following their buying impulses, consumers are concentrating on budgeting and paying off debt.
This change in consumer behavior is reflected in Consolidated Credit’s call center, which has experienced a higher number of calls from consumers seeking budgeting and debt help. The number of calls the organization receives daily has risen 15 percent since the beginning of the summer and counselors now get more than 1,200 calls a day.
Consumers have also increased their savings in the second quarter. Americans saved 4 percent of their after-tax income, up from 2.5 from the beginning of the recession, according to the Federal Reserve.
Consumers should continue saving and paying off debt because the economic crisis is not over. Consolidated Credit advises the following savings tips to consumers:
Build a safety net: During tough economic times it’s important to build a strong financial framework to be prepared for emergencies. The key to building a six-month emergency fund is to cut down on unnecessary spending. Skip the morning coffee, bring lunch to work, forget the Saturday night restaurant trips, stay home and read a book instead of going to the movies.
Control stress and anxiety: Many people like to go on spending sprees when they are depressed or anxious. One strategy to help become a disciplined saver is to look at long-term goals. For example, think about whether it is more important to satisfy a fleeting emotion or to be debt-free in the future? Think of real goals when feeling weak.
Buy generic products: Most name brands have the same ingredients as generic ones; the difference is the price! Generic products can be 30 to 50 percent less expensive. To be sure the products are effective, read the label.
Acknowledge debt: In order to solve a problem, it”s necessary to acknowledge that something is wrong. Even though confronting debt is scary, hiding won”t solve the problem. Talking to family members and financial counselors can make this process easier to overcome.