Personal Debt Issues

Resolve to balance credit card use with reduced debt and more savings

(1/13/2012) ERATE Exclusive - Consumers remain connected to credit card use but not necessarily at the expense of reducing debt and, in this economy, that's a good thing.

The National Foundation for Credit Counseling's December poll found only six percent of more than 2,300 respondents planned to decrease their dependence on credit cards as their number one goal.

"At first glance, that statistic could appear to be a warning sign of future trouble. However, credit is not the problem. Instead, it is the misuse of credit that leads people into financial distress," said Gail Cunningham, spokesperson for the NFCC.

Offsetting what might appear to be over dependence on credit, 62 percent of those queried said decreasing debt is their financial focus for 2012, according to NFCC's December 2011 Financial Literacy Opinion Index.

"If consumers are able to decrease their debt load, continuing to use credit responsibly will help them meet the goal selected by 24 percent of respondents, that of increasing their credit score," Cunningham added.

She also said decreasing debt is a smart move, but not without also adding to savings. Unfortunately only 8 percent ranked saving as their most important resolution for the New Year.

"Without the security of a well-funded emergency savings account, consumers are living without a financial safety net, as unplanned expenses will occur, usually at the worst possible time," Cunningham said.

The poll revealed an interesting 2010-to-2011 trend - in 2010 69 percent said decreasing debt was important to them, compared to 62 percent in 2011, revealing the largest percentage difference between the years.

Another year-over-year difference involved improving the credit score, but that was an improvement. In 2010, 18 percent of consumers chose increasing their credit score as their main goal, while in 2011, 24 percent selected credit score boosting as most important.

"This increase indicates that consumers understand the relationship between the credit score and obtaining credit, confirming their interest in continuing to have access to credit," Cunningham said.

Here's the breakdown from consumers asked to name their primary financial New Year's resolution.

• Decrease debt, 62 percent, compared to 69 percent in December 2010.

• Improve my credit score, 24 percent, compared to 18 percent in 2010.

• Increase savings, 8 percent, up from 7 percent.

• Decrease my dependence on credit cards, 6 percent, down from 7 percent.

"The poll suggests that consumers have recognized the importance of achieving financial stability, and intend to action. Nonetheless, even though paying down debt and improving the credit score are positive steps, the low priority placed on savings is disturbing," said Cunningham.

The NFCC's poll was conducted via the homepage of the NFCC Web site from December 1 to Dec. 31, 2011 and was answered by 2,319 individuals.


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