Subscribe to our mailing list

X

Have Consumers Really Learned Not to Spend on Credit Cards? Nope.

By on March 15, 2010
Have Consumers Really Learned Not to Spend on Credit Cards? Nope.

I wish I could remember who I was having the conversation with a year ago about consumers will have learned a fundamental lesson about how to manage money as a result of this economic downturn we’ve faced in 2007-2010. My point was that any trend downwards in credit card spending is temporary and if consumers are given a chance to ramp up spending, they will.

The other person was making the argument that the evidence of consumer reigning in spending was right in my face with the Federal Reserve reporting a declining balance of credit card debt owed.

I was just reading an article by Stephen Gandel, “What’s Worse: Stingy Banks or Thrifty Consumers?“, and he brought out an excellent observation on the Fed’s G19 consumer debt numbers.

A new study by CardHub found that while credit card debt did fall $93 billion in 2009, a cool $83 billion of that drop, or 89%, came from banks charging off loans, not, as people thought, from customers paying down balances. In fact, when you adjust for the charge offs, consumers actually loaded up their credit cards with an additional $21 billion in debt in the last three months of 2009 alone. – Source

So CardHub and Stephen Gandel deserve a pat on the back for pointing out this little nugget.

I’m not being cynical here and I believe that learning better money habits is a good thing but I’m an economic and consumer debt realist. And that reality is that once banks start to relax their grip on credit, consumers will be drawn, like drunk businessmen to a Vegas strip club, to spend. Okay, maybe that was a bad analogy but I just couldn’t use the old moth to the flame phrase again.

All things being equal, consumers will always be drawn to spending over savings because it meets so many unconscious demands and emotional wants. Don’t believe me, just take a walk down the aisles of behavioral economics textbooks to learn more about the voices in our heads which lead us to spend.

READ  Revolving Consumer Debt Seasonally Adjusted January 2009 to January 2010

Think about this, how many people get laid for being thrifty.


Last step, fill out the information below or call us for Priority Assistance.

What problems are you having with your report?

Your first name is required. Your first name is required to be at least 2 characters. Your first name cannot be longer than 50 characters.
Your last name is required. Your last name is required to be at least 2 characters. Your last name cannot be longer than 50 characters.
Your email is required.
Your phone is required. Your 10 digit phone number is required.
Your state is required.
Your age is required. Your age must be greater than 18. Your age must be less than 100.

By clicking on the "Contact Me" button above, you consent, acknowledge, and agree to the following: Our Terms of Use and Privacy Policy and to receive electronic communications. We take your privacy seriously. That you are providing express "written" consent for Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS - charges may apply), even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list. Consent is not required as a condition to utilize Debt.com services and you are under no obligation to purchase anything.

By clicking on the “Contact me” button above, you consent, acknowledge, and agree to the following: (1)That you are providing express “written” consent for Lexington Law Firm, Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS – charges may apply), or dialed manually, at my residential or cellular number, even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list; and (2)Lexington Law’s Privacy Policy and Terms of Use and Debt.com’s Terms of Use and Privacy Policy. Consent is not required as a condition to utilize Lexington Law or Debt.com services and you are under no obligation to purchase anything.

About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

Share a Comment / Leave a Reply

%d bloggers like this: