Economics

U.S. Households: Less Debt, More Pocket Money

Household balance sheets are in their best shape in years

A partially constructed home stands in a housing development in Peoria, Ill.Photograph by Daniel Acker/Bloomberg

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By Rich Miller, Steve Matthews, and Elizabeth Dexheimer

October 18, 2012 at 8:46 PM UTC

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This article is part of the October 22, 2012 issue of businessweek.

Anita Bullock-Morley was $57,000 in debt on 27 credit cards and close to filing for bankruptcy in 2007. With help from an Atlanta counseling service, she says she paid about $1,400 a month to clear her credit-card balances. Recently she forked over cash for an $800 iPad and an iPhone upgrade.

Americans are finally getting their finances in order. According to data from the Federal Reserve, household debt as a share of disposable income sank to 113 percent in the second quarter from a record 134 percent in 2007. Debt service payments are the smallest in almost 18 years, while the credit-card delinquency rate is the lowest since late 2008. “The household deleveraging process is largely over,” says Mark Zandi, chief economist at Moody’s Analytics.