Freedom Financial Network Expresses Concern About Rapid Credit Card Spending

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FFN Quarterly Comment: Revolving debt increase could indicate funds are tight

U.S. consumers appear to be gaining confidence that the economy is on the mend, and they responded by adding significantly to credit card debt

U.S. consumers appear to be gaining confidence that the economy is on the mend, and they responded in April by adding significantly to their credit card debt, notes the Freedom Financial Network Quarterly Comment on consumer debt and credit issues.

“By far, the biggest economic indicator in the April reports that have just been released is the $20.5 billion increase in consumer credit, which was driven by an 11.5 percent increase in credit cards,” said Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network (FFN). “We haven’t seen a jump this big in credit card usage since July 2011.”

Other economic measures indicate a fairly steady economy. Borrowing for cars and education loans increased by 5.8 percent, more slowly than in the last few months. Income is up slightly more than personal expenditures, and the employment picture remains consistent. Still, many observers are concerned about the sluggishness of the U.S. economic recovery, and the International Monetary Fund last week urged the Federal Reserve to postpone any increases in its key interest rate until 2016.

“Fortunately, consumers do have slightly higher income, but the dramatic increase in credit card usage is worrisome,” added Andrew Housser, FFN co-founder and CEO. “In some cases, consumers may be spending and planning to pay off their debt with higher earnings. However, this trend also could indicate that consumers are relying on credit cards because they do not have sufficient liquid funds to cover necessary expenses.”

Freedom Financial Network observes several economic indicators closely and provides consumer education in its work to help consumers get out of debt and stay out of debt.

Recent financial data as reported:

1.    Total consumer debt trends upward. Total outstanding consumer credit rose by $20.5 billion, or 7.25 percent, in April (the most recent data available). With the increase, total consumer debt (excluding mortgage debt) is projected at $3.385 trillion. Outstanding debt has hit a new high each of the past 41 consecutive months.

2.    Revolving debt shoots upward. For the first time since at least 2010, revolving debt increased faster than non-revolving debt (debt for vehicles and education loans). Total consumer revolving debt, which includes credit card debt, skyrocketed in April by 11.5 percent. That is the largest increase since July 2011. U.S. consumers now hold total revolving debt of $899.5 billion.

3.    Personal income continues to rise. In April (the most recent data available), personal income rose by $59.4 billion, or 0.4 percent, a pace that has been continuing to increase. Disposable personal income increased by 0.4 percent, or $48.8 billion. Personal spending decreased by less than 0.1 percent in April.

4.    Consumers continue to save. In April, consumers saved 5.6 percent of their income, up from 5.2 percent in March. This savings rate has inched up since 2014.

5.    Unemployment essentially unchanged. The national unemployment rate was 5.5 percent in May, essentially unchanged since February. The number of people who are employed part-time, but would like more employment, has moved very little in recent months and remains at 6.7 million. However, the number of long-term unemployed people in the U.S. has decreased by 849,000 in the past 12 months.

The FFN Quarterly Comment pulls together significant statistical releases and provides quarterly comment on timely debt and credit issues that matter to consumers. To schedule an interview with Kevin Gallegos or Andrew Housser, contact Aimee Bennett at 303-843-9840 or aimee(at)faganbusinesscommunications(dot)com.

Freedom Financial Network (http://www.freedomfinancialnetwork.com)
Freedom Financial Network, LLC (FFN), provides comprehensive consumer credit advocacy services. Through the FFN family of companies – Freedom Debt Relief, Freedom Tax Relief, ConsolidationPlus, FreedomPlus and Bills.com – FFN works as an independent advocate to provide comprehensive financial solutions, including debt consolidation, debt resolution, debt settlement and tax resolution services for consumers struggling with debt. The company, which has resolved more than $3.5 billion in debt and assisted more than 300,000 clients since 2002, is an accredited member of the American Fair Credit Council, and a platinum member of the International Association of Professional Debt Arbitrators.

Based in San Mateo, California, FFN also operates an office in Tempe, Arizona. The company, with more than 800 employees, was voted one of the best places to work in the San Francisco Bay area in 2008, 2009, 2012, 2013 and 2014, in the Phoenix area in 2008, 2009, 2010, 2012, 2013 and 2014. FFN’s founders are recipients of the Northern California Ernst & Young Entrepreneur of the Year Award.

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