Consumer Debt Falls, Fees Rise

There’s good news and bad news for consumers emerging from the latest permutations of the global financial meltdown. On the plus side, there is initial evidence that Americans may be starting to live within their means. Consumers owed $7.9 billion less in August than they did in July, according to a report by the U.S. Federal Reserve that tracks both revolving debt, which is almost entirely made up of credit card debt, and non-revolving debt, which includes student and auto loans.

Of course, the new lower numbers nevertheless leave Americans with a large amount of revolving debt––$969 billion––in August, down from $969.6 billion in July, the report found. About 58 percent of people with credit cards don’t pay off their balances at the end of each month. And those who carry a balance every month owe over $17,000 apiece on average, according to the Consumer Federation of America (via Newsday).

On the cash side of the family balance sheet, however, things are getting worse. Fees for overdrawn bank accounts and out-of-network ATMs hit a new record high this year, according to a recent survey of banks by Bankrate.com (via L.A. Times). The average ATM fee is now $3.43. And the average bounced check now costs $28.95 in fees, a 2.5-percent increase from a year ago, the survey found. With banks’ huge bets in predatory mortgage loans continuing to wreak havoc in their balance sheets, increasing fees is one of the few guaranteed ways they have left to raise revenue. So look for these fees to rise even further in the coming months.

Here’s some advice for how to react to these trends:

• Follow the herd. Lots of people are trying to pay off their credit card balances and restrict themselves to using just one card. Now is a good time to follow their lead. “Try to pay off the one with the highest interest rate first, and then keep working at the others,” Candy Wright of GreenPath Debt Solutions, a Michigan-based nonprofit, told Newsday.

• Watch your statements like a hungry hawk. One of the last places you want to spend your hard-earned money is on fees incurred because you weren't watching your bank balance.  Credit.com lists 10 Ways to Avoid Overdraft and Bounced Check Fees.

Tagged as: $7.9 Billion, ATM fees, auto loans, Bounced check fees, Consumer Federation of America, consumer spending, credit card debt, Federal Reserve, revolving debt, student loans

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