The recent unemployment data had some piggy back information with it. Americans are using fewer credit cards, and the cards they do use, they are using less. There isn’t as much credit available, and credit cards aren’t seen as the best source for instant cash anymore, as they once were. Americans are saving more than they used to as well. 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
Fewer people are using credit cards, according to the Wall Street Journal. Revolving credit like credit cards, as opposed to things like payday loans, cash advances or mortgages, has been declining for some time. Revolving credit use has fallen for the last 21 consecutive months. Credit card companies may need credit themselves before long.
Unemployment is a big part of it
People don’t spend as much money on non-essential goods during recessions. Using cash instead of credit becomes the rule, rather than the exception. Buying a new living room set on credit, if it’s not totally necessary, and making minimum payments for decades just isn’t as attractive to consumers in times of recession. Accordingly, the national savings rate went up. The U.S. Department of Commerce showed an increase in savings, as it’s up to 6.4 percent for June, up from 6 percent in April.
People get more frugal when they’re less secure
If people don’t know that they’ll be able to make payments a few months from now, they avoid buying big things on credit. Unless people are getting loans to get some debt relief, there’s no point in going further into debt if security is the goal you are after.
More information on this topic
Wall Street Journal: http://online.wsj.com/article/BT-CO-20100806-715007.html
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