It appears Americans have learned something from the global recession. After years of spending beyond their means, many citizens are now finally beginning to pay off debts, get their finances in order, and more importantly begin to save.
The personal savings rate in America has recovered to 3.6% and American Express claims that more customers are making more than the minimum payment and paying off debt faster. Even more interesting, is that America’s outstanding credit card debt has fallen by almost $100 billion.
However, it’s not all good news. These figures mask the fact that many banks and card issuers are getting rid of bad credit, i.e. they are no longer loaning to people they perceive as risky.
Because of high unemployment and a slow-moving economy many consumers are still stuck in debt. Some are managing to pay off hefty debts in spite of the country’s financial woes, but recent government figures show a drop to 6% in the amount of disposable income consumers are using to pay off their debts.
The picture is much bleaker in the UK. Personal debt is increasing, largely due to rising unemployment, underemployment, pay freezes and high inflation. According to figures from Nation Savings and Investments, the British public was saving 6.22% of their income in summer 2007, during the crisis this rose to 6.48% as people become scared and apprehensive about their future. But at the start of 2010, this rate dropped to 6.25%, or £81.94 a month.
Even more worrying is the number of people not saving at all. This has almost doubled from 20% in 2009 to 37% now. This means people have no safety net for themselves if something goes wrong.
So what options do consumers have, both sides of the pond, in regard to savings and getting their finances in order?
The first step on the road to recovery is to clear debt. Many consumers have so many different bills to pay that things can easily get out of hand, thus one monthly payment is better than ten and one monthly payment at a rate that is affordable is better than a whole range of payment rates that vary from decent to extortionate. A loan to consolidate all others is therefore the best option.
In the UK, many high street banks are starting to offer better loan rates, meaning you don’t have to get a specific consolidation loan. The best offer right now is from Santander. Santander is offering loans at 8.9%, which beats the main competition from HSBC, Barclays and Natwest with ease. Don’t be afraid of taking out a loan to pay off other loans if it means you are financially better off.
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