So the consumer is maintaining their lifestyle even thru inflation by using credit cards. I wish I knew how to profit from this…maybe it will spill into housing.
Many people use credit cards to keep up with their neighbors, friends and coworkers, they don’t care about their own future and want shiny new things now. Over the last year and a half a lot of people are using to credit cards just to survive Bidenflation, those people will be screwed for years.
People have been shopping for goods and groceries online that needs a credit card. That doesn’t mean it isn’t paid off when the bill arrives, me included.
From the link above…
***Households increased debt at the fastest pace in 15 years due to hefty increases in credit card usage and mortgage balances.
The credit card balance collectively rose more than 15% from the same period in 2021, the largest annual jump in more than 20 years, according to the New York Fed.
The increase stems from “a combination of robust consumer demand and higher prices,” a Fed official said.**
People aren’t paying off the balance every month, that’s the problem and with higher interest rates it’s going to get much worse.
Start a payday loan, title loan, or pawn shop.
I think the issue with the increased CC balances is simply that incomes did not keep up with runaway inflation. To make ends meet they financed it. It is going to continue to balloon until it goes pop.
I personally use my CC for everything. My normal CC bill is between 6-9K per month. I pay it off in full every month. In the 23 years of using CC, there was only one month that I did not pay my bill in full. I bought a used motorcycle and financed it for one month on my CC when I graduated college. I was waiting on my sign bonus money but the deal was too good to wait.
Suppress interest rates while ginning up inflation, and people run up the debt. No big surprise there.
Nobody thinks about elderly savers getting clobbered in the process. Nobody seems to care.
My brother was in a LLP that owned a few Title/Payday loan places up until a few years ago. HUGE profits, people would keep extending the loans paying the minimum, the business would get it’s principal back in a month or two but keep making the juice for over a year sometimes.
Same here, it’s just easier plus I get over $600 cash back every year.
Student loans are potentially set to resume at the first of 2023. When these payments are restarted, I expect a larger default rate among CC and auto loans to tick up.
I say potentially because Biden claimed that he was not going to extend the pause. Now that his forgiveness plan is held up in the courts, I read a story that Biden may extend again until the forgiveness is resolved in the courts. I fully expected this to be the outcome. Why would you restart your payments when POTUS has claimed he is going to forgive???
I realize probably $2000 profit from card use per year. The key to me was dumping high annual fee cards, used to have 3 and now only have my chase sapphire reserve.
I agree, the worst is yet to come.
The savings rate went up to 33% during COVID.
After that people celebrated and spent the savings down. Now they are spending on credit, but interest rates are rising.
Things should get interesting next year. Time for the FED to pipe up the inflation via more helicopter money.