A quarter of Americans have more debt than savings

A recently released survey shows that about a quarter of adult American consumers owe more to credit card debt than they have as a backup in savings. That could be disastrous should they face a real financial emergency, economists say.

Consumers worn down by recession

The survey, conducted by BankRate.com, was released Tuesday. It polled more than 1,000 adult consumers and concluded that, while most consumers have become more adept at living within their means, years of economic hardship has worn them down and
depleted savings. And much consumer frugality is born of necessity, not from learning lessons.

Tougher credit forces frugality

Although the number of people reporting to have more savings than debt was higher than a year ago — 54 percent as compared to 52 percent — Greg McBride, Bankrate.com’s senior financial analyst, warns of interpreting the figures as an indication that American consumers are less addicted to debt. In the current economy, credit is much harder to get than in the past. Consumers “can’t go spend money they don’t have,” he explained.

Those with least income hit hardest

Consumers with the least amount of income are in the most precarious situation. According to the survey, 75 percent of those who made $75,000 or more have more in savings than they owe to plastic. That is opposed to only 40 percent of consumers
earning $30,000 a year or less.

College grads better off than high school grads

The survey also found that more college graduates were in a better position than were those with only a high school diploma. Of the college grads surveyed, 64 percent owed less than they had in savings. Only 46 of high school grads could say the
same thing.

Rising gas prices could make it worse

McBride also said the situation could worsen if gasoline prices continue to escalate:

“Sixty percent of Americans said they cut back on discretionary spending because of gasoline prices.”

Consumer confidence lower than 2011

The study also reported lowered confidence in financial security than a year ago. Twenty-seven percent felt less secure this year, contrasted by 24 percent who are more confident now.

Credit scores increasingly important

Many employers now use credit checks as part of the employee pre-screening process. That exacerbates the job hunt frustration for unemployed people with bad credit ratings who are looking for ways to reduce their debt.

[An installment loan can help pay off old debt and raise your credit score.]

Savings vs debt ratio fairly steady

Basically, McBride said, the ratio of savings versus debt has not changed much since the Great Recession began:

“Over the years, the savings needle hasn’t moved. From 2007 and 2011, the percentage of Americans with three months worth of expenses in savings, which is not adequate, is unchanged.”

About the study

The study was conducted for BankRate.com by Princeton Survey Research Associates International. Surveys were done over the telephone, polling 1,006 consumers during the first week of February 2012.

Sources

Sacramento Bee
Global Post
MSNBC