"The results of the Cambridge Consumer Credit Index wildcard question show that economy should be receiving a boost from consumer spending in spring and early summer"
Jordan Goodman, spokesperson/financial analyst for the Cambridge Consumer Credit Index

Nearly seven out of ten Americans (68%) who already have received or anticipate receiving a tax refund this tax season plan to spend it on everyday items or pay bills, up from 59% in 2003, according to the Cambridge Consumer Credit Index. Less than a quarter (23%), down from 27% in 2003, plan to save their refunds in their bank accounts, while 4% plan to invest their refunds in stocks, bonds or mutual funds, unchanged from 2003. Of those surveyed, 68% expect to receive a tax refund, 18% will owe money and 14% will not be paying any taxes.

The Cambridge survey also asked respondents who owe money to Internal Revenue Service how they plan to pay their bills. 74% said they would take the funds from their checking or savings account, down from 82% in 2003, while 7% plan to take a loan from bank, up from 4% in 2003. For a more detailed comparison see table below.

"The results of the Cambridge Consumer Credit Index wildcard question show that economy should be receiving a boost from consumer spending in spring and early summer. More Americans than last year plan to use their refunds on everyday purchases and bills and fewer Americans will be saving or investing their refunds. While the results indicate good news for the economy in the short term, they also indicate a more worrisome trend that an increasing number of Americans are relying on their tax refunds for everyday purchases and paying bills," says Jordan Goodman, spokesperson/financial analyst for the 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 in April remained at 59, unchanged from March. The Index rose in two of its three component 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, decreased by 4 percentage points from March to 8 points. A month ago, 79% of Americans planned to pay off debt, while a month later 71% actually did so.

Wild Card Question:

Have you or do you expect to receive a tax refund this year or do you expect to owe money when filling your taxes this year?

What do you expect to do with your refund money?

How will you pay for the amount you owe when filing taxes this year?

  
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 773 people who answered, this was the order of their responses:

1. I am frustrated with high bank rates and fees (33.0%)

2. My income has been reduced from a lower salary, less overtime or layoff
(26.6%)

3. I want to improve my ability to achieve future financial goals like
buying a house or saving for retirement (13.2%)

4. I got into too much debt by overspending (8.3%)

5. Other (4.5%)

6. My lack of financial education caused me to take on too much debt
(7.1%)

7. Large medical expenses forced me to take on huge debts (6.1%)

8. My recent divorce or widowhood forced me to take on large debts
(1.2%)

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 58 on this question, a rise of four points from March.

In April, 29% of Americans say they have taken on more debt, with 22% taking on a little and 7% taking on a lot more debt. Conversely, 71% of Americans have paid off debt, with 51% paying off a little and 20% paying off a lot.

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

The Index reads 36 on this question, a drop of six points from March.

In April, 18% plan to take on more debt, with 6% planning to take on a lot and 13% planning to take on a little debt. Conversely, 82% plan to pay off debt, with 63% paying off a little and 19% paying off a lot. In March, 21% planned to take on debt and 79% 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 82 on this question, up by two points from March.

In April, 41% of Americans plan to take on more debt to make such purchases, with 13% taking on a lot of debt and 28% taking on a little more debt. In contrast, 59% of Americans plan to pay off debt in the next six months, with 40% expecting to pay off a little and 19% expecting to pay off a lot. In March, 40% of Americans planned to take on more debt, while 60% planned to pay off debt.

"The results of the Cambridge Consumer Credit Index show a modest rise in consumer confidence. Consumers took on a bit more debt in the last month, and anticipate taking on even more debt in the next six months. The six-month level of 82 is near an all-time high, showing that confidence about the long- term future is quite high," 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.