Debt-fueled spending, of the non-mortgage kind, contributed to the boom economy in a very big way. In the last of the boom years, non-mortgage debt reached $200 billion annually. A recent Federal Reserve Bank of New York report shows that debt other than mortgage or home equity has dropped significantly since 2008 – by 8.7%. This steep drop points to a new consumer attitude about buying on credit.
The debt picture in the U.S. resembles something like the following:
- Mortgage 74%
- Home Equity Revolving 6%
- Auto loan 6%
- Credit card 6%
- Student loan 5%
- Other 3%
In the past ten years, credit card debt has dropped from 8% to 6% of consumer debt. At the same time, the number of credit card accounts peaked in 2008 at nearly 500 million and has since fallen to about 378 million. This represents a drop of 24%. Consumers are clearly focusing on paying down their credit card debt. The percentage of delinquent credit card accounts has begun to fall from its peak of nearly 14% earlier this year.
With this consumer mindset in place, marketers must continue to position their goods and services with a value focus in order to increase sales for the short term. And as long as the employment picture remains clouded, the value message will probably remain in play.[Sources: Quarterly Report on Household Debt and Credit. November 2010. Federal Reserve Bank of New York. Web. 19 Nov. 2010; Brown, Meta, et al. Have consumers become more frugal? Federal Reserve Bank of New York. November 2010. Web. 22 Nov. 2010