Some Consumers, Over Their Heads In Debt, Borrow More
September 28, 2000
Bingeing on a seemingly endless stream of easy credit, America's middle class is spending more and saving less than ever before. When it's time to pay the bills, many turn to new sources of credit to keep pace with currently due obligations. One result, credit experts say, is that they have excellent credit reports -- with no past-due notices and no collection activity.
- The Federal Reserve says the greatest expansion in consumer debt has taken place among households with incomes below $50,000 annually.
- In that bracket, 20 percent had debt-to-income burdens of 40 percent or more in 1998 -- well above 1995 levels of 15 percent of households.
- Only 5 percent of higher-income households carried burdens this high.
- One result is that business is booming for concerns which provide "payday loans" -- advancing cash to workers, which they repay when the next paycheck comes in.
The growth of such services is astonishing. In Illinois, for example, there were only three such outlets in the entire state in 1997. Today, there are more than 500, according to industry sources.
Source: Bernard Wysocki Jr., "Hangover May Loom for Americans Who Enjoyed Credit Boom," Wall Street Journal, September 28, 2000.
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