The recent unemployment data had some piggy bank data with it. Americans are using fewer charge cards, and less use is being made of the cards they do use. As there is less short term credit available, fewer people want to use their charge cards as a source of instant money. People are also saving more than they used to. Consumer goods are a huge part of the economy, and purchasing non-essential goods has dropped off which is counterproductive to the economy.
Use of credit cards falls
The Wall Street Journal reports that credit card use is still trending downward for Americans. Revolving credit like credit cards, as opposed to things like payday cash advances, money advances, or mortgages, has been declining for a while. Revolving credit use has really declined steadily for the last 21 months in a row. At this rate, the credit card corporations will need a payday advance themselves.
A big piece of this puzzle has to do with unemployment
During recessions, individuals make less non-essential purchases. Using cash gets closer to the rule, rather than the exception. If an individual makes a big purchase like a new refrigerator or living room set on a credit card, making minimum payments for the next 50 years is not as palatable. The national savings rate, on the other hand, went up. The US Department of Commerce showed a rise in savings, as it is up to 6.4 percent for June, up from 6 percent in April.
With less security comes less spending
There is no point in purchasing unnecessary goods, particularly if you don’t know if you’ll be able to afford the payments a few months down the road. If financial security is the goal you have in mind, there’s no have to go further into debt that you do not need, unless you’re getting a loan to consolidate and get some debt relief.
Additional reading
Wall Street Journal
http://online.wsj.com/article/BT-CO-20100806-715007.html
