If the Federal Reserve's recent cut in interest rates makes it less expensive and easier for people to obtain loans, it would be bad news for Yusupha Touray.
By his estimate, the 27-year-old Long Beach, Calif., resident owes about $93,000 in credit-card, phone, utility and hospital bills. "When my bills come, I know I don't have any money to pay them," he said. "So I don't bother anymore."
Nevertheless, Touray said he receives pitches from credit-card issuers in the mail almost every day. If those pitches become a smidge more attractive because of lower interest rates, he said he just might be tempted to go even deeper in the hole.
"It's amazing," Touray said. "You keep saying, 'No,' and they just keep making more offers."
The Fed said its decision to cut short-term interest rates by half a percentage point was intended to ease the credit crunch in the housing market. That's another way of saying the main beneficiaries are heavyweight financial institutions that were hurt by investments in subprime loans.
The Fed's action could mean lower mortgages for some consumers, but also lower rates on credit cards and auto loans. And for those who aren't careful, it could result in even more debt for a country that's drowning in consumer debt.
"There's definitely a danger that people will be tempted to take out too much credit," said Linda Sherry, a spokeswoman for Consumer Action in Washington. "They'll use it for things they want, rather than things they need."
That's not necessarily a bad thing, considering that consumer spending accounts for about two-thirds of the U.S. economy. But unless managed prudently, it can spell trouble for many households.
According to recent Federal Reserve statistics, U.S. consumers are carrying a record $2.456 trillion in debt (not including mortgages).
The amount of revolving credit, such as credit cards, carried by consumers rose in July at an annual rate of 6.6 percent, or by $5 billion - the third straight month of significant gains. Revolving credit was up 6.4 percent in June and a whopping 10.9 percent in May, the Fed reported.
Non-revolving credit, which includes auto loans, registered a 1.9 percent gain in July. That compares with 5.6 percent in June and 5.5 percent in May.
With lower interest rates, it's possible that revolving and non-revolving credit will increase. And with it, consumer debt.
Sima Azim knows all about that. The windows and display cases of her downtown Los Angeles jewelry store drip with bling - gold chains, gold bracelets, gold watches.
Azim, 45, said that with the economy the way it is, she's seeing more people using plastic instead of cash to buy baubles.
"People love the gold," she said with a shrug. "So they use their credit."
Frank Banueloz, 44, works as a legal analyst for the California Department of Justice. He said he tries to manage his finances wisely. Even so, he and his wife are carrying about $10,000 in credit-card debt.
"I'm trying to use cash more instead of credit," he said. "It's hard to do."
The flip side of consumers' record-high debt level is a pathetically meager personal savings rate. People are spending every last penny they earn, and often are dipping into savings, stocks or other resources to spend just a little bit more. The savings rate crept up to 0.7 percent in July from 0.5 percent a month earlier.
During the first three months of the year, the average family spent 14.3 percent of disposable income to service its debt load, according to the liberal-minded Center for American Progress. That's up from 13 percent in the first quarter of 2001.
John Barnes, 76, works as a construction inspector. Shortly after the Fed slashed rates, Barnes was watching as a power shovel dug a trench in a downtown Los Angeles street.
Credit-card debt? Nah. He said he doesn't carry plastic. "If I can't pay for it, I don't get it," Barnes said. Such simple advice. And it can make all the difference.
David Lazarus writes for the Los Angeles Times.