Consumer Credit Falls at Record Pace

The most recent consumer credit report released by the Federal Reserve shows that Americans paid down their consumer debt in record numbers in August of 2008. The numbers were astonishing because the number showed that for the first time in eleven years, Americans actually paid down more debt than they spent. Are we learning from our previous mistakes? I think so. U.S. outstanding consumer credit decreased by 3.7% in the month of August. This my not sound like a whole lot when you look at the percentages but Americans paid down 7.9 Billion in consumer debt in August according to the Federal Reserve. Credit Card and other revolving debt fell by .8% or .6 Billion dollars in August while non-revolving borrowing fell by 5.4% or $993 billion.

There are pros and cons to this report. If we are not spending then we are saving and that makes us more susceptible to a recession. If we do not pay down our consumer and credit card debt then we are less likely to keep our heads above water during this financial crisis. Times are extremely difficult right now for many people. The best advice you can get is to be smart right now with your money. Don't make knee jerk decisions to liquidate your assets such as 401k's, etc. You will obviously lose right now. Economists say that 401k's are designed for the long haul and not to make spontaneous decisions. You may have lost money recently but if you can ride out the wave you will be better off in the long run.