No Big Surprise, Consumer Borrowing Up and Down At The Same Time
http://myvesta.org/articles/articles/152/1/No-Big-Surprise-Consumer-Borrowing-Up-and-Down-At-The-Same-Time/Page1.html
Steve Rhode
Steve Rhode is the founder of Myvesta US in the United States and the Chairman of Myvesta UK in the United Kingdom. By Steve Rhode
Published on 09/8/2008
New data out shows consumer borrowing is the slowest it has been in seven months. While access to home loans has fallen and fewer people are hot-to-trot to purchase a new car or truck there is one segment of the consumer credit world that is still marching right along, credit cards.
Don't Let the Numbers Fool You
New data out shows consumer borrowing is the slowest it has been in seven months. While access to home loans has fallen and fewer people are hot-to-trot to purchase a new car or truck there is one segment of the consumer credit world that is still marching right along, credit cards.
Credit cards grew at a rate of nearly 5% in July and more people are turning to easy credit to get by as prices for everything else seem to be creeping upwards.
Of real concern is that while retailers are predicting a sour holiday spending season, it will still be sufficient enough to topple the personal financials of hundreds of thousands of Americans.
The holidays mark the prime guilt spending time of the year and people who can’t afford to spend money on celebratory gifts will do so anyway. Especially strong in the upcoming holiday spending period will be the forces of guilt shopping to make up for long hours away from children and family while working long hours to make ends meet, and matching shopping to match spending levels to others that give you gifts.
People do spend based on the cost of gifts they get. If someone is going to give you a gift that you think is worth $50 then some people do go out to try to match the value of the gift so they don't feel inferior regardless if it is in their budget or not.
Both of these guilt spending areas easily lead people unconsciously to spend more than they can realistically afford. And with less available cash, look for a slower holiday spending period but a stronger reliance on easy to access credit cards to fuel what shopping there is. Unless credit card banks rein in credit limits prior to the holiday season, look for a heavy credit hangover come January.
Credit cards grew at a rate of nearly 5% in July and more people are turning to easy credit to get by as prices for everything else seem to be creeping upwards.
Of real concern is that while retailers are predicting a sour holiday spending season, it will still be sufficient enough to topple the personal financials of hundreds of thousands of Americans.
The holidays mark the prime guilt spending time of the year and people who can’t afford to spend money on celebratory gifts will do so anyway. Especially strong in the upcoming holiday spending period will be the forces of guilt shopping to make up for long hours away from children and family while working long hours to make ends meet, and matching shopping to match spending levels to others that give you gifts.
People do spend based on the cost of gifts they get. If someone is going to give you a gift that you think is worth $50 then some people do go out to try to match the value of the gift so they don't feel inferior regardless if it is in their budget or not.
Both of these guilt spending areas easily lead people unconsciously to spend more than they can realistically afford. And with less available cash, look for a slower holiday spending period but a stronger reliance on easy to access credit cards to fuel what shopping there is. Unless credit card banks rein in credit limits prior to the holiday season, look for a heavy credit hangover come January.