Consumer Debt

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A Consumer Debt is an outstanding debt held by a consumer for the purchase of consumer goods.




    • QUOTE: In economics, consumer debt is outstanding debt of consumers, as opposed to businesses or governments. In macroeconomic terms, it is debt which is used to fund consumption rather than investment. It includes debts incurred on purchase of goods that are consumable and/or do not appreciate.[1]

      In recent years, an alternative analysis might view consumer debt as a way to increase domestic production, on the grounds that if credit is easily available, the increased demand for consumer goods should cause an increase of overall domestic production. The permanent income hypothesis suggests that consumers take debt to smooth consumption throughout their lives, borrowing to finance expenditures (particularly housing and schooling) earlier in their lives and paying down debt during higher-earning periods.

      Both domestic and international economists have supported a recent upsurge in South Korean consumer debt, which has helped fuel economic expansion. On the other hand, credit card debt is almost unknown just across the sea in Japan and China, because of long-standing cultural taboos against personal debt. Theoretical underpinnings aside, personal debt is on the rise, particularly in the United States and the United Kingdom. However according to the US Federal Reserve the US household debt service ratio is at the lowest level since its peak in the Fall of 2007.[2]

  1. "Consumer Debt Definition". Investopedia. Retrieved August 24, 2011. 
  2. US Federal Reserve. "Household Debt Service and Financial Obligations Ratios". Household Debt Service and Financial Obligations Ratios. Retrieved December 4, 2012. 



  • (Lea et al., 1993) ⇒ Stephen E. G. Lea, Paul Webley, and R. Mark Levine. (1993). “The Economic Psychology of Consumer Debt.” In: Journal of Economic Psychology, 14(1). doi:10.1016/0167-4870(93)90041-I
    • ABSTRACT: Questionnaires were distributed to groups of people with either no debt, mild debt, or serious debt to a public utility company. Serious debtors were found to differ from the Non-debtor group on economic, sociological, and psychological variables: economic resources, economic need, social support, attitude forming variables and attitudes all made independent contributions to the prediction of group membership and the extent of self-reported debt. Mild debtors were generally intermediate between Non-debtors and Serious debtors. Debt was strongly correlated with economic factors. Many results indicated that debt is a consequence of adverse family economic conditions: Serious debtors were of lower socioeconomic class, had lower incomes, were less likely to own their own homes (and much less likely to own them outright), had more children and were more likely to be single parents. They were also younger. Social and psychological factors were also found to be related to debt: Serious debtors were less likely to claim Nonconformist, Agnostic or Atheist religious views, and they had slightly more permissive attitudes towards debt, although no group showed a general tendency to approval of debt. They knew more other people who were in debt, and they were less likely to think that their friends or relations would disapprove if they knew they were in debt. Multivariate analyses showed that economic, social and psychological variables all had independent correlation with debt. These results suggest that debt is stronly influenced by adverse economic circumstances, but that social and psychological factors are also important. The conditions for the development of a self-sustaining ‘culture of debt’ do exist.