More Than One Third of Americans (38%) Plan to Use Less Credit on Holiday Gifts This Year Compared to Last Year, According to the Cambridge Consumer Credit Index

ISLANDIA, N.Y., Dec. 5 /PRNewswire/ -- More than one third  (38%) of all Americans plan to use less credit to purchase holiday gifts this year, up by 7 percentage points from 2002 when 31% planned to use less credit, according to the latest survey by the Cambridge Consumer Credit Index. 29% plan to use the same amount of credit as they did last year, two percentage points lower than in 2002. Another 29% plan not to use any credit cards this season, down by 7 percentage points from 2002.

The Cambridge Index also asked consumers who plan to use credit cards this season whether they expect to pay them off in full when the bills arrive in January. 60% say they expect to pay off their balance in full, up from 58% a year ago and 55% in 2001. 36% expect to carry a balance on their credit cards for more than a month before they pay them off, unchanged from 2002, and down from 39% in 2001. Only 4% plan to pay off some cards and carry balances on others, down by 2% from 2002 and 2001.

"The results of the Cambridge Consumer Credit Index show that more consumers plan to use less credit for Christmas shopping, implying that more will be making purchases using savings and cash. Consumers already burdened with credit card debt also have high hopes of paying off their balances in full when the bills arrive in January. However, Cambridge 's experience with the Reality Gap shows that consumers usually underestimate their willingness to take on debt and overestimate their ability to repay it quickly," said Jordan Goodman, spokesperson/financial analyst for the Cambridge Consumer Credit Index.

                                                               2003        2002        2001

More credit card debt                                 4%          2%          4%

Less credit card debt                                38%         31%         30%

About the same credit card debt                29%         31%         31%

Will not use credit card debt                      29%         35%         36%

Repay bills in full                                      60%         58%         55%

Carry bills for more than a month                36%         36%         39%

Pay off some cards and carry balance         4%          6%          6%

Source: Cambridge Consumer Credit Index

These findings are the result of monthly nationwide telephone poll of 1000+ adults conducted by ICR/International Communications Research in the past week, sponsored by the Debt Relief Clearinghouse.

The overall Cambridge Consumer Credit Index rose five points in December to 65 - two points below its all-time high of 67 reached in December 2002.  The Index rose in two of the three composite questions.  The "Reality Gap," which is the difference between the amount of debt consumers say they will pay off in the next month versus the amount of debt they actually paid off a month later, narrowed by 5 percentage points to 7 points from 12 points in November. A month ago, 77% of Americans planned to pay off debt, while a month later 70% actually did so.

The Cambridge Consumer Credit Index is a forward looking economic indicator gauging consumer spending and debt. It is released on the fifth business day of every month to coincide with the Federal Reserve Board's G19 release of consumer credit outstanding data.

In conjunction with the Index, the Cambridge Credit Counseling Corp. is releasing its monthly survey of people who have called in for credit counseling services over the past month. Cambridge representatives ask callers for the primary reason that they found it necessary to get help with their debts now. Of the 628 people who answered, this was the order of their responses:

1. I am frustrated with high bank rates and fees (33.6%)

2. My income has been reduced from a lower salary, less overtime or layoff (23.2%)

3. I want to improve my ability to achieve future financial goals like buying a house or saving for retirement (13.9%)

4. Other reasons (8.6%)

5. I got into too much debt by overspending (7.2%)

6. My lack of financial education caused me to take on too much debt (6.4%)

7. Large medical expenses forced me to take on huge debts (5.6%)

8. My recent divorce or widowhood forced me to take on large debts (1.6%)

For more information on the survey see

http://www.cambridgeconsumerindex.com/camsurvey.htm

The Cambridge Consumer Credit Index number is a composite of these three questions:

1. In the past month, have you taken on more debt or paid off debt?

The Index reads 60 on this question, a drop of four points from October.

In December, 30% of Americans say they have taken on more debt, with 22% taking on a little and 9% taking on a lot more debt. Conversely, 70% of Americans have paid off debt, with 53% paying off a little and 17% paying off a lot.

2. In the next month, do you anticipate taking on more debt or paying off debt?

The Index reads 56 on this question, a jump of ten points from November.

In December, 28% plan to take on more debt, with 8% planning to take on a lot and 19% planning to take on a little debt. Conversely, 72% plan to pay off debt, with 58% paying off a little and 14% paying off a lot. In November 23% planned to take on debt and 77% planned to pay off debt.

3. In the next six months, do you expect to take on debt because you are thinking of making a major purchase such as a car, education, appliance, medical procedure, furniture or carpeting?

The Index reads 78 on this question, up by eight points from November.

In December, 39% of Americans plan to take on more debt to make such purchases, with 12% taking on a lot of debt and 27% taking on a little more debt. In contrast, 61% of Americans plan to pay off debt in the next six months, with 47% expecting to pay off a little and 14% expecting to pay off a lot. In November 35% of Americans planned to take on more debt, while 65% planned to pay off debt.

"The Cambridge Consumer Index survey shows that consumers are expecting to take on a great deal of new debt in the next month and six months, which is a sign of rising confidence in their economic future. Clearly part of the increase is seasonal since people take on more debt to buy holiday gifts. But with the Index rising to its second highest level in history, it is evident that consumer optimism is also spreading across America ," says Jordan Goodman, spokesperson for the Index.

The Index survey is conducted by ICR (International Communications Research) of Media , Pennsylvania over five days in the week before the Index is released. Over 1000 households are polled based on random-digit dialing, with all demographic and regional groups in America fairly represented. The Index has a margin of error of plus or minus three percentage points.

Consumers wishing to find out more about Debt Relief Clearinghouse referral services should call 1-888-4DEBTHELP or visit http://www.debtreliefonline.com/.

SOURCE   Cambridge Consumer Credit Index
CO:   Cambridge Consumer Credit Index
ST:   New York
SU:  SVY
Web site:  http://www.cambridgecredit.org
http://www.prnewswire.com
12/05/2003 08:30 EST