CROWN'S MISSION:
Equipping people worldwide to learn, apply, and teach God's financial principles so they may know Christ more intimately, be free to serve Him, and help fund the Great Commission.

Search Crown Articles

 

> Search by Topic FAQs Pamphlets Pastor's Corner .............. Addictions Adoption Adult Children Auto Bankruptcy Banks & Credit Unions Benevolence Borrowing & Lending Budget Budgeting Business Children & Family Church Administration Church Borrowing Church Finances Church/Pastor Taxes College Debt & Credit Divorce Economy Education Employment Fundraising Gambling Giving/Tithing Government Housing Insurance Investing Leadership Legal Marriage Medical Auto Miscellaneous Missions Pastors Retirement Saving Single Parents Stewardship Suing Taxes Teaching Welfare Wills & Trusts > Search by Keyword Budget Debt Credit Cards Investing Tithing Refinance Consolidate Marriage Saving

 

Hot Topics

Household Debt in 2007

The total overall household or personal debt outstanding in the United States increased by another trillion dollars to 13.8 trillion dollars in 2007. This is an eight percent increase over the year before and a 97 percent increase since the year 2000, when it was 7.0 trillion dollars.¹

The Federal Reserve gathers data on all reported funds on a monthly basis. The two main components of household debt outstanding are mortgage debt outstanding (2007 total = $10.5 trillion) and consumer credit (2007 total = $2.6 trillion). The rate of increase for mortgage debt has been much higher than that for consumer credit. Mortgage debt increased by eight percent over the last year (slightly lower than the nine percent increase last year), but more than doubled (119 percent) since 2000. Consumer credit debt increased by 8.3 percent from last year and 53 percent since 2000.²

Other outstanding debt categories reported by the Federal Reserve are domestic business debt and the federal government debt. Business debt rose by eleven percent from 2006 to $10.0 trillion. The federal debt at $5.1 trillion (up four percent) seems minimal when compared with the domestic household debt. However, the amount of the 2007 interest expense on the federal debt outstanding including U.S. Treasury notes and bonds, savings bonds, government account series, and state and local government series was over $221 billion.³

According to the U.S. National Debt Clock which includes agency debt such as Social Security and other retirement trust funds, the outstanding public debt as of the date of this document is almost $9.4 trillion. Using the estimated population of the United States, 303,957,353, each citizen’s share of this debt is $30,800.93.⁴

It will be interesting to see the effect of the mortgage crisis on the rate of increase of mortgage debt in 2008. The rate of increase of mortgage debt in 2007 was slightly lower than in 2006. However, the total mortgage debt will very likely continue to increase regardless of the mortgage and credit situation.

The other component of domestic household debt, consumer credit, may see some adjustments from the Federal Reserve and others in the regulatory industry. Efforts are being made to stop or reduce practices that tend to increase credit card balances especially for people in financial difficulties.

The National Credit Union Administration (NCUA), the Federal Reserve Board, and the Office of Thrift Supervision issued a joint proposed rule on May 2 that would prohibit the following seven practices associated with credit card programs, possibly by the end of the year:⁵

1. Unfair time constraints for consumers to make payments; statements to be mailed at least 21 days before payment due date.


2. Unfair allocation of payments among balances with different interest rates; require allocation in a manner beneficial to the member, for example, allocation of payment over the minimum to the item with highest interest rate.


3. Unfair application of increased annual percentage rates to outstanding balances; prohibit applying an increased interest rate retroactively to pre-existing balances; exceptions--cases involving a variable rate, the expiration of a promotional rate, or where the member is more than 30 days late in making the minimum payment.


4. Unfair fees for exceeding the credit limit solely because of a hold placed on an account;


5. Unfair balance computation method; prohibit from computing the finance charge using a “two-cycle” average daily balance computation.


6. Unfair financing of security deposits and fees for issuance or availability of credit; no charges more than 50 percent of credit offered and require spreading fee over first year rather than a lump sum.


7. Deceptive firm offers of credit; require firm offer of credit with range of rates and terms to include a description of the factors used to determine whether the member will qualify for the best rates and terms.

Eliminating these major sources of outstanding debt requires long-term planning for most Americans and a dedicated objective for becoming debt free.

The information in this Hot Topic was adapted from the original articles by Bette Noble, Crown Sr. R&D Specialist. Quotes or statistics must reference the original source.
_____________________________________________
¹ Flow of Funds of the United States, March 8, 2008 Release, Z-1 Release, Debt Outstanding Tables, Federal Reserve Statistical Release, 6 .
² Ibid, Flow of Funds of the United States.
³ Ibid, Flow of Funds of the United States.
⁴ U.S. National Debt Clock, http://www.brillig.com/debt_clock
⁵ NCUA to Issue Proposed Unfair or Deceptive Credit Practice Rule, Press Release, http://www.ncua.gov/news/press_releases/2008/MR08-0501.html

 

 

 

 

 

 

 

ECFA member since 1988