U.S. Consumers Relying on Credit

[marmar]

(Bloomberg) Consumers in the U.S. are increasingly using credit cards to pay for basic necessities as income gains fail to keep pace with rising food and fuel prices.

The dollar volume of purchases charged grew 10.7 percent in June from a year ago, while the number of transactions rose 6.8 percent, according to First Data Corp.’s SpendTrend report issued this month. The difference probably represents the increasing cost of gasoline, said Silvio Tavares, senior vice president at First Data, the largest credit card processor.

“Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares, who’s based in Atlanta. “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problem.”

Rising costs of food and gasoline are leaving Americans less money to spend discretionary items, slowing the pace of the recovery, Tavares said. Household spending accounts for about 70 percent of the world’s largest economy. ............(more)

The complete piece is at: http://www.bloomberg.com/news/2011-07-21/consumers-in-u-s-relying-on-credit-as-inflation-erodes-incomes.html

[katnapped]

1. Need to funnel more money to the rich then

Since it seems obvious the poor can't manage their money! :sarcasm:

[lunatica]

2. They'll eventually have to declare bankruptcy just like millions before them

because the credit card companies loath them and will soon lower their credit limits and raise their interest rates. Some credit card companies will simply freeze their accounts and deliberately change the due dates on their bills so they can charge late fees.

Been there, done that. And being bereft of credit cards every extra expense (taxes due, car registration, car tune-up, etc.)puts you in the hole a little deeper.

[ck4829]

3. This is one of the major reasons how the great depression got started

It is a little different. Back then, people got credit for luxuries and never bothered to pay for it. Now, people don't have jobs or have jobs that don't pay enough but still need to eat.

This is going to get ugly and fast.

[luckyleftyme2]

4. DO YOU REALLY THINK

DO you really think that people like "DICK ALMY,CANTOR,BONHER,MCCONNEL " GIVE A CHIT ABOUT
THE MIDDLE CLASS? OF COURSE THEY DON'T EXCEPT AT ELECTION TIME !
NOW THEY ARE MARRIED TO BIG OIL!

[nc4bo]

5. Credit cards, pay day lending loans and car title loans....

if usage is going up above average, it has to be a symptom of economic desperation so many people are feeling.

We need to work. We need jobs. The average American does not want to live like this.

Instead of giving away money to the corporations are people, warmongers and Wallstreet conartist crowd, why don't we take that same money and spend it on a grand nationwide infrastructure rebuilding project. Of course there needs to be a strictly enforced set of rules where contractors and individual states must hire American citizens, those here legally or those on there way to legal citizenship, as a priority or it will be meaningless.

Whenever is the time right to take care of those who keep the wheels of this country moving. Isn't it past time?

[dmallind]

6. not necessarily "forced"

some of us have simply worked out that spending on credit cards generates more interest than a savings account. When every purchase gets 1% cash back while HSBC only gives 0.9% for a deposit account, using a card for all purchases then paying off at the end of the month is "double dipping" on interest, with spending beinbg the biggest dip.

Haven't used cash in months. Haven't used it for more than vending machines and fast food for years.

[marmar]

7. But that's not the larger point of the story.....

Clearly not everyone is using credit cards for the same reason you are.

[dmallind]

8. Sure - anecdotes/data and all that - but all we have are data. Reasons are guesses either way

There is no evidence to prefer one guess over another. This is simply the amount of credit card use - not a study why. It's almost certainly some of both - quite probably more due to need than choice, but with interest ratesas low as they are trust me I'm not the only one on the choice side.

[marmar]

9. But if a spike in credit card use accompanies a spike in gas and food prices.....

....... you can make a reasonably educated guess as to why.

[dmallind]

11. all who buy those things on credit are paying higher prices though - regardless of reason

my credit card spending on these items has increased also. Again remember my only point is that not all, by a very long way not all, credit card spending even on daily items is due to having no alternative. I'm certainly not suggesting that the latter possibility does not hsppen, or even is not increasing.

[Gormy Cuss]

10. It's an observation on credit card usage trends by people who watch this for a living.

It's not a study where people were asked on usage and it's difficult to say what the distribution of reasons for higher credit usage, but then again, trending data doesn't require that. The data shows that something has changed and in a rather dramatic way, and a look at some of the categories of usage shows that the trend seems to mirror higher costs in gasoline and food. Comparing that to past credit card usage trends suggests, but does not prove, that people are using credit cards because they don't have available cash.

As I'm sure you know, the trend analysis can be accurate even if there are a small percentage of people who have increased credit card use for other reasons.