Declining US Consumer Debt Signals the Beginning of a New Financial Era

by Guest Author Regina King

Econintersect: On a hopeful note, U.S. Credit Score Climate Report compiled by a leading consumer credit advocate indicates that consumer credit card debt is finally on the decline. Currently, the average amount of debt that a consumer nationwide carries is $6,472, which signifies a considerable decrease of 10% during the first six months of 2011, and 17% since June 2010.In fact there were a number of states that stood out in the report for declines in credit card debt larger than the national average. Mention must be made of California, Texas, and Massachusetts, which has shown an 11% drop in consumer debt whereas in Illinois, Missouri and Minnesota there was a 12% drop. The trend of declining consumer debt continues with New York, Alabama and West Virginia, where the consumer debt has dropped till 13%. The residents of Wisconsin and Hawaii can also boast for their 14% drop in consumer debt. However, New Hampshire has broken all records so far with the biggest drop in debt at 17%.

However, at the high end of the scale, the three states whose residents currently hold the highest average amount of personal debt are Connecticut with $7,479, New Jersey with $7,531 and Colorado with $7,543. Never mind, some other interesting findings of the report includes, Minnesota, Wisconsin and Oregon are the states with the least amount of auto loan debt, whereas Texas, Louisiana and Oklahoma have the maximum debt attributed to automobile loans. If you take notice of Mortgage debt, it is declined the most in Nevada since January, shrinking overall by 5%, while in Iowa however, mortgage debt showed an increase of 3%.

Card issuers are paying heed to this focused effort by consumers to handle their debt more responsibly. Several lenders are relaxing their underwriting standards, nudging up the limits of individual credit lines and sending out millions of appealing credit card offers boasting perks like a free balance transfers, cash-back bonus rewards and travel incentives such as airline miles and V.I.P upgrades at airports and hotels. Plenty of new Visa credit card offers are launched that are loaded with bonus being offered by some of the nation’s largest banks, including Chase, Capital One and Bank of America. In fact, MasterCard and American Express are also following suit.

Nevertheless, the best is yet to come. The average credit score has remained constant since the beginning of 2011, and fell just two points since last June to 667. According to Kevin Lin, the CEO of the consumer credit advocate site that published the report. “Economists are optimistic about the second half of 2011, as gas prices continue to drop and home costs level off.” With more and more consumers reducing their credit card debt, it is presumed that the overall credit score of the nation would stabilize sooner than before. Let’s wait and see what lies ahead.

Note from the Author: Regina King is a financial writer and currently associated with Oak View Law Group. She has been consistently providing people with unique services on investment,budgeting and debt settlement services since 2007. You can reach me at: regina.king85(at)gmail(dot)com.