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Consumers Put Less Money Toward Savings Accounts

Posted by Bill Crowley on February 15 2011 @ 7:05 am

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Consumers add fewer funds to their savings accounts in last half of 2010. During the holiday season, many consumers used their credit cards more for purchases. As a result, retailers and issuers saw big revenue boosts and many predicted the recovery could soon be in full swing.

However, many consumers may simply be overspending, using the card to rack up big balances they might not be able to pay.

One indication of this is that fewer Americans are putting portions of their monthly earnings toward their savings accounts, The Los Angeles Times reports. Overall, the savings rate dropped to 5.3 percent, down from 6 percent in August, and the lowest percentage observed since March of 2010.

"Many people are being very cautious [about their finances]," David Wyss, chief economist at Standard and Poor's in New York, told the Times. "Whether they're being cautious enough is the
question."

Still, some economists say consumers are saving just as much as on their old debt-carrying habits. These critics point to problems with the statistics calculations that put too much emphasis on revolving credit and fail to include accumulated savings and proceeds from
stock holdings.

Timely articles written by the Editors at DRC

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