Credit Card Spending Booming
April 1, 2008
Consumers across the country are turning to the credit cards more to get by. Credit card use by U.S. consumers increased in January as consumers spent twice as much on their credit cards as they did a month earlier.
The numbers are staggering. Credit card use rose by $6.9 billion to $2.52 trillion, the Federal Reserve said recently. In December, credit gained $3.7 billion, less than a previously reported increase of $4.5 billion.
These numbers do not include consumer borrowing secured by home-equity loans.
Home equity loans are dropping off, in fact, as home values fall. In the past, consumers often used home equity as a loan vehicle, now that that option is closed for many they are turning to their credit cards. Personal income in January rose at a slower pace than inflation, and credit card usage in January rose for a second straight month.
Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York recently said: “There is not much gas left in the tank. In the early stage of a recession, consumers tend to rely on credit cards to see them through the hard times.”
The use of credit cards may increase even more as the people are losing their jobs. The government reported that employers eliminated 63,000 jobs last month. This might lead to consumers having to rely on credit to make ends meet as they look for new employment.