Another myth bites the dust, as a new study published today by the American Institute for Economic Research (AIER) finds that “the majority of Americans are not struggling with persistent credit card debt.”
The study was done by Polina Vlasenko, Ph.D., a research fellow at the Great Barrington, Massachusetts-based think tank. Vlasenko reviewed data drawn from the Federal Reserve’s Survey of Consumer Finances (SCF) for the years 1989 to 2007. The Fed updates the SCF every three years.
Vlasenko found that 27 percent of U.S. families have no credit or charge cards at all, and among those that do, the median number of cards was only two. The latter figure was unchanged from 1989.
The percentage of families with outstanding balances has increased since 1989, but at a dramatically slower pace than access to credit cards. The latter increased three times faster than the rate of increase in unpaid balances, according to Vlasenko. The median unpaid balance was $3,000.
Nearly half, 42 percent, of families with credit cards had no unpaid balance after settling their most recent monthly bill. Only one family in five wth credit cards routinely carries an outstanding balance, according to Vlasenko.
“The recession has supposedly led to increases in family savings, major efforts by families to reduce debt, and other belt-tightening measures, so the figures given in the Fed consumer-finance survey probably even exaggerate the extent of the current credit ‘problem’,” Vlasenko said.
“As is often the case, the reality is often less extreme and dire than we are led to believe. Sure, some families and individuals are drowning in credit card debt. And some misuse their credit cards. But the vast majority of Americans appear to manage their credit wisely,” Vlasenko said.
These figures come on the heels of President Obama’s proposal for creation of a new super federal agency tasked with protecting consumers from financial fraud, and passage of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that mandated new rules on when credit card companies can increase interest rates.
For more information on the AIER study, go here.
