Are consumers finally becoming more responsible with their credit cards these days, or is being approved for a new plastic card becoming harder?
In July of this year the American consumer reduced their total credit card dept by $21.6 billion, when $4 billion was expected. Economist have expected that consumers will spend less, decreasing credit card debt, but not by this amount. The last time consumers were this close to cutting their credit card spending was in 1943. But what has really stumped the economists is which force is influencing the decreased borrowing. Is it the lack of demand by consumers who might be cutting up their credit cards? Or is it the lack of credit supply from the banks?
I say both. The downturn in the economy has left consumers more cautious in spending, especially as unemployment rises. Consumers don't want to be caught paying for purchases they made on credit while unemployment is expected to rise. In addition the credit crunch has caused banks to put lower limits on credit cards, as well as increase the standards to obtain credit.
Consumer slash borrowing by record amount