Spotlight on Financial Services

Consumer Survey

The Federal Reserve Board has just released its latest Survey of Consumer Finances. A full discussion of the findings is available in the January 2003 issue of the Federal Reserve Bulletin. These surveys are conducted every three years and contain data that should interest anyone who markets products and services to consumers, but especially financial institutions.

Types of household debt

The table below shows that just over 70% of household debt is in the form of housing debt, and that the percentage allocations hardly changed over the 9-year period. The only significant change has been a decrease in the portion of borrowings that are secured by residential properties other than the borrower's primary residence.

Percentage Distribution of All Types of Debt, 1992 and 2001
*Type of debt*	1992	2001
House-secured debt	72.0	75.1
Other residential property	10.4	6.4
Installment loans	11.3	12.3
Other lines of credit	0.8	0.5
Credit card balances	3.2	3.4
Other	2.3	2.3
Total	100.0	100.0

What are the characteristics of individuals' holdings of different forms of debt? These data will interest marketing professionals. The data provided here are from the 2001 survey, although the article also provides the data from the 1998 survey. Let us focus on use of installment loans and credit cards. The portion of families having some type of credit card rose to 76.2% from 72.5% just three years earlier. Over those three years, the portion of households holding a bank type credit card rose 5.2 percentage points to 72.7%. The portion of consumers who carried a balance on their bank cards fell one percentage point to 53.7 percent. The proportion of households holding travel and entertainment cards reached 10.5%. But, the percentage of families with store cards fell 4.8 percentage points to 45.2%. Only 16.1% of respondents held gasoline company credit cards. Half of the respondents said that they paid their credit card bills in full each month.

Percent of Households With Debt by Household Income, 2001
Family characteristic	Installment loans	Credit cards
Percentile of income
Less than 20	25.5	30.3
20-39.9	43.2	44.5
40-59.9	51.9	52.8
60-79.9	56.7	52.6
80-89	55.7	50.3
90-100	41.2	33.1

The purpose of borrowing

To gain a broader perspective on consumer borrowing, we have taken a six-year classification of the purpose of the borrowing. Not surprisingly, mortgage debt account for the large majority of total household indebtedness. Counting home improvement loans and loans secured by other residential property, mortgage debt accounts for about 80% of all household indebtedness.

Amount of Debt of All Families Distributed by Purpose of Debt, 1995 and 2001
	1995	2001
Home purchase	70.3	70.7
Home improvement	2.3	1.9
Other residential property	8.2	6.6
Vehicles	1.0	2.8
Goods and services	7.6	7.8
Education	5.7	5.7
Other	2.4	1.4
Totals	100.0	100.0

In next month's edition of Spotlight we will address the question: Are consumers over indebted? Stay tuned.

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