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Credit Card Applications » News » Other » Consumer Spending Drops Over Saving

Consumer Spending Drops Over Saving

November 14, 2009
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While the country struggles in the recession with consumer credit diving to $21.5 billion in July, data shows that people are not only shying away from borrowing but are actually keeping their cash in their wallets.

The Federal Revenue has released word that credit card balances continue to drop as consumers have become more cautious in filing for credit. Many people choose to pay off their debts and as soon as they are cleared, they are keeping their credit cards untouched. Other than that, many are directing their incomes towards saving rather than spending.

People have thought of cutting back expenses on home repairs, vacation and the like. The only things the majority of consumers spend on are the essential of everyday living like groceries and gas. Consumers only managed to shell out some cash in July which boost consumer spending when the government introduced the Cash for Clunkers program. The spending rate increased to 0.2 percent. Cash for Clunkers allowed drivers to exchange their old vehicles for new, more fuel-efficient models. Still, if auto sales were excluded, the rate at which consumers spent was low.

The Federal Reserve addressed the poor spending matter. The agency said that without the increase in motor vehicle purchase which was caused by the said government program, indicators of consumer spending in general were mixed for the month of July. Due to several determinants, consumer spending remained on a weak balance. These include the fragile labor market which strained the household income and the previous net worth declines.

In contrast to consumer spending tumbling down, the personal saving rate is on the rise in the same month. A percentage of disposable personal income was 4.2 percent which is slightly lower than saving rate which is 4.5 percent in June. Although there was decline, analysts say that it is all part of an ongoing trend. People are seen to be "deleveraging themselves" to cut their debts.

Experts are lead to believe that people are trying to rebuild their cash cushions especially when they no longer have additional source of income with the values of their homes going down or completely out. It is predicted that consumers will continue to save some more in the coming months.

In the past, such savings rate was never attained. In fact, it was extremely low which does not really support a sustainable trend. According to economist Sean Maher, the demand for credit will also be lower when the recession is over.

Some analysts believe that the public relationship with credit cards are significantly altered at the moment and in will continue to be in the following months. However, it will also be a matter of time until credit cards find their place in the consumer's wallet once again. Furthermore, Mather says that consumers are having positive thoughts about economic recovery which would very well re-establish their credit card usage. However, it could take some time for credit cards to be in demand.

It is also predicted that consumer spending and revolving credit balances would turn to normalcy in the second half of 2010. this is the same time the Federal Reserve expect banks to finally adjust their lending standards and continue with their normal operations.

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  • Larry
    With the Virgin / Barclaycard signature offer, there seems to be some consumer deception or maybe even outright fraud goin on.   I decided to jump on this offer..  read all the info on it..  was approved for their platinum card, paid the fee, then was only awarded 10,000 points instead of the advertised 20,000.   When i inquired about the less than advertised bonus points, Barclaycard claims only Signiture Visa cardmembers get the 20,000..  as a platinum cardholder, you don't qualify for that level of bonus, so you get 10k instead.   Well, in their current ongoing promotions, it states plain as day that....    Applicants approved for the Visa Signature or Platinum Card with $49 annual fee will receive 20,000 Bonus Points awarded to your Virgin America Rewards Account at the close of the first billing statement in which you make your first purchase or balance transfer (that is not returned or rescinded) and have paid the Annual Fee on the account (and such fee is not rescinded). They don't mention anything about a separate program for platinum cardholders..  However, trying to get someone to resolve this issue with either Virgin or Barclaycard seems to be rather impossible.. Seems to me they're simply drawing people in with the fraudulent offer, then simply saying, oh, we're sorry you don't qualify..  but thanks for signing up for our garbage credit card with insane fees..   
  • CreditLandCom
    Thank you for sharing your experience with us. We have reviewed this offer and you are correct, nowhere it is mentioned that 20,000 Bonus can become a 10,000 Bonus all of a sudden... We will mention this in our review of this card so others can make an informed decision. Another way to get Virgin miles is to get an American Express charge card: The Business Gold Rewards Card® now offers 50,000 Miles, though you do have to spend $5,000 in the first three months of card membership to get it. It also has $0 introductory annual fee for the first year, then $175. http://www.credit-land.com/details/the-business-gold-rewards-card-from-american-express-open.php Premier Rewards Gold Card now offers 25,000 Miles, though you do have to spend $2,000 during your first three months of Card membership. It also has annual fee of $0 for the first year, then $175. http://www.credit-land.com/details/american-express-premier-rewards-gold-card.php While we do not know If any of these offers make sense to you, we are at least sure that you will get advertised bonus in full if you decide to get them... Conversion rates for Virgin America are: 100 Elevate Points = 200 Membership Rewards® Points All the best.
  • Deborah Ellsworth
     would very much like to start a new credit history  by making payments on time I would tohave a credit card that is NOT PREPAYID! I don't need a card with a high limit just something to start a new credit history. Thank You Deborah Ellsworth
  • Deborah Ellsworth
    I would very much like to start a new credit line to get back on track. I DO NOT WANT A PREPAID CARD!! This new credit card if I am approved does not have to hace a high limit just something for me to start over again and prove myself ThankYou. D Ellsworth
  • Miss Edna
    there is a huge problem with the RFIP chip: it is easily compromised. There are already 'readers' in the form of what looks like a cellphone in a case, that scans all the info in the chip by merely walking near a person -- this 'reader' penetrates leather, cloth, spandex, etc. The only thing it will NOT penetrate is METAL. Perhaps one has seen commercials touting metal credit card cases. Here is my hint for a free fix: cut a piece of aluminum foil or use the foil that is used to keep foods fresh, like coffee. Cut it so that when folded once, it forms a sleeve for your credit card. place the credit card in the sleeve, then place the sleeve in your wallet.
  • Robin Parks
    I am looking to apply for the AARP Visa signature card from Chase that offers $100 after spend $500 in first 3 months, no annual fee and 0% interest first year; I don't want to mail in offer because of having to write in Social security #. Can you direct me to the proper on-line site?
  • CreditLandCom
    The Chase bank cards are not currently available at Credit-Land.com, but you can consider applying for the Citi® Dividend Platinum Select® Visa® Card - $100 Cash Back. The cards has similar terms and cash back program.
  • Becky
    This is Becky Now what do I do just waqit for acard to come to me?
  • CreditLandCom
    Once you have applied, you should receive a letter within 10 business days letting you know if you were approved and when your card will arrive. If you did not receive any letter or notification from the issuer, you should contact them directly. Also, you should contact the issuer if you’ve been waiting for your credit card longer than 30 days. Since we are not a bank and don’t issue credit cards, we cannot give you any information about your application or credit card.
  • SavingStar
    Thank you for posting about SavingStar. Just to clarify one sentence in your article, we have over 5 million members (not 500). Thanks, Josh
  • CreditLandCom
    Sorry for the misprint. We’ve corrected the sentence. Thank you for noticing that.
  • Eric
  • John Stifler
    I think almost all people that familiar with internet, will hardly fall to these scams, but for now, I think people that use computer but don't familiar with internet things, and they has a phone line at their home, they should be warned more than internet users. I think senior people usually got scammed by these kind of "tech support" scams. Found so many reports about them since years ago at complain board sites like http://callercenter.com. We as younger, and know more about this stuff, should help and share information to they who needed it, especially older people.
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