Consumer Debt

Report Outline
Strains on Consumer Credit
Changing Views on Borrowing
Future Credit Trends in U.S.
Special Focus

Strains on Consumer Credit

Concern Over Mounting Consumer Debt

Neither a borrower nor a lender be,” Shakespeare advised. But many consumers seem to be ignoring the first part of that admonition in their rush to keep up with — and stay ahead of — inflation. At the close of the 1970s, Americans were borrowing more and saving less than they had in years. Consumer credit, which includes installment and non-installment debt but not mortgage obligations, amounted to $370 billion in September 1979, up from $185 billion in February 1975. In the past decade total personal debt, including mortgages, has more than doubled, rising from $430 billion in 1970 to $1.2 trillion in the third quarter of 1979. The average family now spends approximately 23 percent of its disposable income to pay off its mortgage and other debts.

In their struggle to maintain their standard of living in the face of double-digit inflation, many Americans are drawing on their savings. The Commerce Department reported Jan. 17 that in 1979 the savings rate fell to a 30-year low of 4.5 percent of disposable income. That was down from 4.9 percent in 1978 and was the lowest yearly level since 1949, when it was 3.6 percent. The savings rate in November was 3.3 percent, the lowest since the department began keeping monthly figures in 1956.

The drop in savings coupled with the rise in personal debt worries many economic analysts. They are particularly concerned about the ready availability of credit, notably credit cards and revolving bank accounts which make it possible for customers to write checks for more money than they have. There are nearly 600 million credit cards in use in the United States today — an average of seven cards for each of the 82 million adults who use them.