Breaking News from MoneyNews.com
February 23, 2008
New Poll Shows Most Americans Won’t Spend Stimulus Check
Congress intends the forthcoming tax rebates to stimulate the economy, but a new study reveals that more than six of 10 surveyed say they will use the money to pay bills or park it in a savings account.
The survey — conducted by Zogby International for TransUnion’s TrueCredit.com —polled 3,036 adults, adding slight weights to answers for regional, political, racial, religious, gender and age differences to more accurately reflect the population.
A sampling of the pollster’s online panel, which is representative of the adult population of the U.S., also participated.
Forty-two percent of respondents reported they plan to use their windfall funds to pay down debt. An additional 20 percent say they will save the money, while 16 percent plan to buy “something they consider necessary.”
A mere 5 percent admitted they would probably splurge.
“While policymakers have expressed hope that consumers will spend the proposed rebates and help strengthen the economy, consumers seem more focused on their own credit health right now than on anything else,” says Lucy Duni, director of Consumer Education for TransUnion’s TrueCredit.com.
Paying bills and saving instead of buying more stuff? What’s happening to American consumers?
Maybe they’ve come to realize that reducing debt is always a better personal economic stimulus than adding more.
“Adding to your savings is one thing that will certainly never go out of style and, as we tell consumers online, keeping credit card and other debt in check can really help tip the scales in your favor the next time you go in search of a home or car loan,” Dani notes.
Paying off or even paying down credit card balances makes sense for consumers.
Unlike mortgage debt, personal credit card interest can’t be deducted from the net income on which federal taxes are paid.
Credit card interest charges and fees are also not deductible as business or investment losses.
Financial advisors also encourage homeowners with adjustable-rate mortgages to move to a fixed-rate loan if at all possible, doing a payback analysis on when the break even point for closing costs would be reached.
Unfortunately, thanks to the subprime crisis, credit is still too tight for most consumers.
As Fed Chairman Ben Bernanke somewhat understatedly noted in a recent speech, there is “considerable evidence that banks have become more restrictive in their lending to firms and households.”
Until credit standards loosen and the government guarantees more mortgages, the U.S. economy — which is 70 percent consumer-driven — will continue to falter.
Stimulus funds should be available beginning in early May. The amounts taxpayers will receive depend on their income, marital status and the number of children they have living at home.
Married taxpayers with two kids and a household income of less than $150,000 can expect to receive $1,800.
Individuals making more than $75,000 and families taking in more than $150,000 can expect their payments will be less.
