Savings Climb, but So Does Borrowing

Americans saved more money in 1988 than in the previous year, but they have borrowed record amounts, too, suggesting that they have not changed the free-spending habits that worry policy-makers.

The rate at which American consumers saved money rose to 4.2% last year from 3.2% in 1987, but it was considerably below the 7% savings rate of the early 1980s, the American Bankers Assn. reported Monday.

Consumers also charged or borrowed more as installment debt rose to a record $691.1 billion at the end of the first quarter of 1989 from $659.5 billion at the end of 1988, the ABA report said, citing Federal Reserve data.

The data supports other reports showing that consumption is still brisk, helping the economy along. The small rise in the savings rate comes after a long erosion that sparked concerns among economists that Americans spend too much and invest too little in comparison to other people.

The average installment loan made in 1988 was $8,284, with an average unpaid balance of $7,775 at the end of the year, according to the 1989 Installment Credit Report.

Commercial banks held 48.4% of installment credit outstanding, while finance companies held 22%. Credit unions held 13% and savings institutions had 9.4%.

Banks charged off more than $1.8 billion on their consumer credit portfolios last year, with bankruptcy accounting for between 26% and 31% of these losses.

The report pegged the delinquency rate at 2.49% at the end of 1988, up slightly from 2.47% at the end of the previous year.