Surveys say: Americans report cutting back spending, debt
Recent polls say consumers changing habits to adapt to sour economy
There's growing evidence that many consumers are heeding advice from financial planners and credit counselors to cut back on spending and reduce their debt loads in the face of the declining economy. Three different consumer polls released this week reveal how Americans are changing how they use credit and plan to use it in the future.
The polls ask the same question in different ways, namely, how consumers have changed what they do with their credit cards or spending since the economy has taken a nosedive. The resounding answer reflected in the results: Americans are cutting back and changing their attitudes about spending money.
The surveys were conducted in September and October -- just before and during the height of the Wall Street financial crisis and discussion of the Bush administration's $700 billion bailout plan. The polls were commissioned by Consumer Action, a San Francisco-based consumer advocacy coalition, comScore, an Internet marketing and information provider, and TrueCredit.com, the website arm of credit reporting bureau TransUnion.
According to the polls:
- More than two out of three adults (69 percent) say they will try to pay with cash and do not expect to take on additional debt in the next 12 months (Consumer Action).
- Nearly two-thirds of Americans (68 percent) report they'll spend less as a result of the economy. More than half of Americans (55 percent) expect the current economy to affect their discretionary spending, while nearly a third (31 percent) say they expect the interest rates on their loans, mortgages and credit cards to be impacted; 17 percent felt their credit scores will be affected (TrueCredit.com).
- More than two-thirds of respondents said they have changed the way they pay for purchases because of concerns about the economy. Nearly half (50 percent) say they are more likely to use cash, while a third (34 percent) said they were more likely to pay with a debit card and only 18 percent were more likely to use credit cards. Twelve percent of those who have changed their spending habits report they've begun to consolidate their spending to fewer credit cards and 5 percent said they are spreading the purchases out over a greater number of credit cards (comScore).
The comScore survey also noted that online credit card applications dipped 6 percent during the second quarter of 2008. The top 10 credit card issuers reported a drop in their website applications for the first time in five quarters. Prime applicants, those with FICO scores of 660 or more, accounted for much of the decline while subprime card applicants, those with FICO scores of 660 or less, showed an increase in applications.
The results of all three recent surveys echo findings from the annual CreditCards.com "Taking Charge" survey conducted June 4-26. In that survey, one in four people spent less on household expenses such as groceries in June than they did in previous months. Almost a third reported spending less on discretionary items such as eating out or entertainment.
AmEx cutting jobs
The pullback by consumers is affecting card issuers' bottom lines. American Express, the credit card issuer that caters to upscale consumers, announced Oct. 30 it was cutting 7,000 jobs worldwide as part of a reengineering plan to cut operating costs going into 2009. The cuts "will help us to manage through one of the most challenging economic environments we've seen in many decades," said Kenneth I. Chenault, the firm's chairman and chief executive. AmEx's woes are the latest sign of trouble for credit card issuers who have been hit by the credit crunch, economic downturn and rising loan and credit card write-offs.
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