AMERICA’S DEBT MANAGEMENT HAMPERING THE ECONOMY?

Analysts are saying that the fact that American’s have reduced their debt, are practicing better debt management and saving money is a primary reason the economy is not on a faster recovery track! It is no wonder that as the U.S. household wealth fell by a record setting $5.1 trillion dollars just from October 2008 to December 2008, according to Federal Reserve figures nearly doubling the decrease amount for the previous quarter, that we find American’s are still skeptical about spending money.

As home prices and the stock market plunged net worth for households and non-profit groups declined to $51.5 trillion dollars in the third quarter, which is the lowest level in the past four years. The decline in household wealth is one reason analysts say that the economy will be on a slow recovery track, as consumers will continue to reduce debt and save more. “This decline in wealth is a headwind for spending and it’s a big reason to be cautious and to save”, said Jonathan Basile, an economist at Credit Suisse Holdings USA Inc. in New York.

Some economists are speculating that a large number of consumers with substantial credit card debt have revamped their spending/debt budgets drastically and many are even seeking professional credit counseling to assist them with their spending habits and debt management.

Households barrowed less, and debt decreased at an annual rate of 2%, the first ever drop in debt on record, while mortgage barrowing dropped to a 1.6% annual pace. These are the numbers and they speak for themselves, Americans although showing some confidence in the first quarter and better than we anticipated, are still and should be very cautious in their debt management strategies and spending. Saving money has to once again be a part of every Americans daily life and money/debt management practices if they are ever to be able to manage their finances in such a way as to be debt free once again. One option is to find a way to secure a debt consolidation loan.

For those that have large amounts of credit card debt, budgeting and better debt management practices may not be enough to get you out of troubled waters and seeking debt resolution through a reputable credit counselor may be your only advisable solution. Many companies offer free debt consolidation advice, good information is still valuable even if it is free. Professional credit counselors can strategize with you to adopt a well planned course of action to get you back to debt freedom once again.

BANKS AND CREDIT CARD COMPANIES ARE LINING UP AGAINST YOU

As consumers are feeling the sting of the slumping economy and finding they have to be better debt managers and save more money and try to reduce our debt to income ratio, credit card companies are making it their profitable business to make it much harder.

Most Americans are feeling the pain of the recession, and many even have been thinking that now is the opportune time for using the; accrued points, bonuses, benefits, discounts, or so called rewards that they have accumulated for using their credit cards.

But, it should be no surprise that just as people want to actually begin to cash in, (although that is an oxymoron), on the benefits from using our credit cards, that in fact credit card companies are making it harder and harder for you to do so, by raising the bar on redemption thresholds.

According to Affinity Solutions Inc. a company in New York that manages and develops rewards programs, credit card companies are raising the bar on reward programs and the easiest way to do that is to increase the point redemption values or the number of points needed to cash in on your rewards.

Approximately 40% to 45% of credit cards and 20% to 25% of debit cards have access to rewards programs, although the terms may be very different. Debit card use is growing and more and more banks are expanding their debit card reward programs to cash in on this lucrative area of the market by expanding their rewards program to lure in consumers, but in order to take advantage of those rewards consumers are usually required to spend more money in order to receive the same reward points as a credit card offers.

Even though there are steps the consumer can take to increase the amount of points one accumulates to maximize your rewards with your credit card company, this should not influence consumers spending. Many find themselves searching for a free debt consolidation service.

A credit card holders primary goal should be to receive the lowest possible interest rate on the debt they owe, or to reduce or eliminate the debt altogether. The main area of concern should be the interest rate and fees being charged to those who are carrying a debt or revolving balance.

Rewards programs will not help you with your debt management, debt solutions or debt resolution, but are likely to get you further into debt, and if you are a consumer who is carrying a revolving balance that can lead to serious debt management problems.

The moral of the story is; in this economy and the proposed near future we all need to be prudent in our debt management, spend wisely, and not be taken in by reward programs.