NEW YORK, Oct. 15 /PRNewswire/ -- As the downturn in the economy
deepens, U.S. credit card users are increasingly having a difficult time
managing their personal debt according to the results of a new survey by
Standard & Poor's about how American consumers use credit cards to manage
personal debt.
With declining home prices and rising inflation, credit cards have
solidified their place in consumers' wallets, although credit cards are
being used as a source of cash rather than a substitute for it. The survey
showed that 10% of Americans are taking out more cash advances on their
credit cards than in the past.
The survey also showed U.S. credit card users are struggling under a
burden of high credit card balances. One in five individuals surveyed
indicate they are "sometimes" (14%) or "always" (6%) unable to pay their
credit card and/or loan(s) balances each month. An additional 8% can only
make minimum payment required and another 8% either always or sometimes pay
less than the minimum.
In terms of the dollar value of balances carried by credit card users,
22% have between $5,000 and $20,000 in credit card debt, while 3% have more
than $40,000 in credit card debt. When looking at their debt as a
percentage of their available credit, 25% are at or near the maximum limit
of their primary card with an additional 20% are at or near the limit of
their secondary card. Over the past year, 13% of respondents have found it
a lot more difficult to keep up with credit card payments, while 25% have
found it somewhat more difficult. That compares to just 10% who said it was
less difficult.
When asked to prioritize their monthly bills, 35% of respondents said
their mortgage was the bill they would pay first while 26% of those
surveyed said it was their credit cards.
"This survey bears out the change in consumer behavior we've heard
about during the last 18 months. Homeowners almost always paid their
mortgage first, now over a quarter of Americans say their credit card is
the monthly bill with the highest priority," said David Wyss, Chief
Economist of Standard & Poor's. "With the value of homes dropping,
consumers are no longer able to refinance their credit cards into home
equity loans. As a result, we should expect to see the rise in balances and
delinquencies continue."
The findings of the study generally confirm what we are seeing in
securitized card receivables. As we anticipated in our scenario analyses,
losses have continued to increase in line with the economic downturn.
However, thus far, S&P-rated credit card ABS have demonstrated more
resiliency compared with other securitized asset types. Relative ratings
stability in card ABS to date may be explained by the fact that about 85%
of S&P-rated outstanding card ABS are backed by assets originated by the
top 6 large, well capitalized, highly rated U.S. banks. We believe these
lenders are experienced in managing portfolios through multiple business
and economic cycles. Additionally, there are few S&P-rated pure non-prime
pools left in the market due to consolidations and exits of non-prime card
lenders over the past years.
For more information on S&P's views on credit card ABS, please see
Scenario Analysis: Prime U.S. Credit Card ABS May Dodge Defaults But Still
See Downgrades Under Higher Peak Loss Forecast published on October 6,
2008.
Survey Methodology
Standard & Poor's in partnership with the Ketchum Global Research
Network created and administered a 42 question online survey to 1,002
Americans who were at least 18 years old. The survey was fielded between
August 20th and August 25th 2008, and tested at the 90% and 95% confidence
intervals with a margin of error of +/- 3%. Results are representative of
the overall U.S. population. Field work was conducted by M/A/R/C Research.
About Standard & Poor's
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE: MHP),
is the world's foremost provider of financial market intelligence,
including independent credit ratings, indices, risk evaluation, investment
research and data. With approximately 8,500 employees, including wholly
owned affiliates, located in 23 countries and markets, Standard & Poor's is
an essential part of the world's financial infrastructure and has played a
leading role for more than 140 years in providing investors with the
independent benchmarks they need to feel more confident about their
investment and financial decisions. For more information, visit
http://www.standardandpoors.com.
SOURCE Standard & Poor's
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Related links:
http://www.standardandpoors.com
CONTACT:
Ed Sweeney of Standard & Poor's,
+1-212-438-6634, edward_sweeney@standardandpoors.com
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