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Consumer borrowing rises while spending shrinks

Over the past decade, the topic of debt has made countless headlines. Whether the subject is large businesses, the government banks, credit cards, Tennessee families or college students, debt is frequently associated with all of these ideas.

According to the Federal Reserve, U.S. consumer debt reached an all-time high last October. This recent report describe the measures many Tennessee families are taking in order to make ends meet, which includes assuming credit card debt even if it is not the most opportune time to do so.

Furthermore, U.S. consumers used their credit cards more often in October than they had in the previous months. The Federal Reserve reports that consumers increased their borrowing more than $14.2 billion during the month of October. This accounted for total consumer borrowing at record levels: $2.75 trillion. Credit card debt climbed by a staggering $3.5 billion, which is one of the primary reasons the figure increased by so much.

To compound the problem, there was no corresponding increase in consumer spending, which is traditionally associated with economic growth. The rise in borrowing actually occurred in month during which consumers cut spending. The reason for the belt-tightening may have included any one of several recent events, such as Hurricane Sandy, the European debt crisis or consumer concerns over the "fiscal cliff." Any and all would provide a reasonable explanation for the results.

For many Americans, taking on debt can provide short-term relief with long-term stress. For those overwhelmed with debt, waiting may not be an option. The sooner a person explores his or her debt relief options, the sooner they can begin to turn things around. There are a number of tools available to consumers to stop creditor harassment, reduce credit card debt and relieve many of the financial challenges currently facing consumers.

Source: The Associated Press, "Consumer debt hits all-time high," Martin Crutsinger, Dec. 8, 2012

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Mark T. Young & Associates
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