Only twice since 1965, despite half a dozen recessions, have Americans spent less in a year than the previous one. Indeed, it often seems that we have defined ourselves by our ability to buy supersized everything, from McMansions to tricked-out SUVs to 60-inch flat-screen televisions—all enabled by decades of cheap credit.
Now that the credit party is over, how are consumers reacting?
"The process of bringing our wants and our needs into realignment," says Merrill Lynch economist David Rosenberg, "is going to involve years of savings and frugality." Or, to put more it more simply, "there is an anti-bling thing going on," says Marian Salzman, chief marketing officer of Porter Novelli.
Of course, if you're broke and have no access to credit you don't have much choice but to be frugal, but is that all that's going on here? Or are consumers tired of being pressured to take on massive debt in order to "super size" and "bling" everything? What do you think? Is credit card consumerism over?
Is Starbucks' "free refills" offer the new "super size it"?
(Full disclosure: I'm quoted in the article, and yes... yes my first car was a Geo Metro. It's true. Despite what "FreeCreditReport.com" would have you believe, some people do choose to drive them. And they also get their credit reports from www.annualcreditreport.com.)
The End of Credit Card Consumerism [US News & World Report]
(Photo: tokyohanna )
I drove a Chevy Sprint through 2 University degrees - it's an ideal student car - cheap to buy, cheap parts, cheap on gas and you can't go too fast. Of course - mine was only 3 years old when I bought it - the same car would be closing on 20 years old today, like the one in that commerical.
]]>@: For most of those, a debit card will usually suffice. I've bought airline tickets, booked hotel rooms, rented cars, moving vans, etc., with one. If they want to put a hold on the card, don't consent to anything that actually allows them to withdraw money, don't consent to anything greater than the estimated charge and get it put in writing when the hold will be released and/or applied to the balance. FWIW, out of all of this, I have only had a hold placed once and have been asked for a minor deposit ($25-50, applied when I returned the truck) a couple of times. BFD.
Not to mention, if more people ditched the plastic, it might just force these companies to going back to the way they used to do business. They changed their policies to be more convenient to them because they assume everyone these days has a credit card. They are still subject to charge backs, fraud, etc., when someone hands them a credit card.
]]>Major corps avoid taxes like you wouldn't believe.
]]>Some people are worried, or in trouble, and as such they are spending less. People who are doing well are seeing how others are affected, and they are also laying a little low. Credit issuers are cracking down and making life difficult for people who run up their bills and that is surely hurting sales from people who buy things they can't afford. When the economy recovers, frivolous spending will gradually follow.
I wonder, though, if people are slowly starting to realize the value of well-made high-quality products. Products like the iPhone defy the current market.
]]>@darkryd:
And let's think of all the things that you can not do without a credit card:
- Purchase any items online
- Rent a car (without paying up to $200 out of pocket for incidentals)
- Stay in a hotel (without paying out of pocket for incidentals)
- Buy a airline ticket (most ticket agents do not accept cash/check)
- Rent a Moving Van
- Change of Address on USPS.COM
Enjoy being ostracized by our consumerist society for not having debt! :)
]]>@Victo:
Credit cards are not evil, but the cc companies that use predatory practices, like double cycle billing - which charges interest on money you already paid off, changing due dates to trip you into late payments, boosting interest rates because you are maxed out on a different credit card, etc. are evil practices that must stop. They prey on the ignorant, and make money hand over fist, and when they get in trouble, they go to congress for a bailout.
]]>@rorschachex: I think even they will send you a bill if you're short. They may even have their own "house" credit card. Either way, I'm pretty sure you can have your PL steak and no cash in pocket.
@ideagirl: Purchase within your means, charge it, and pay it off every month. Carry no balance, and you'll accrue no interest. It's a novel concept for some.
]]>(patting self on back)
]]>@battra92: Don't get me wrong. I don't think the government should be taxing companies either.
I fully support a national sales tax. It would generate more money and it would be OPTIONAL!
]]>@CreoleSugar:
Perhaps you don't understand, a car is not a bike.
On the other hand, you can't do chargebacks with cash.
]]>What's this about Starbucks free re-fills? Oh yeah, I remember now: free refills on coffe, not any of their other drinks. Doesn't impact me, too bad.
]]>@battra92: Couldn't have said it better myself. www.fairtax.org
]]>Like another poster said, I pay EVERYTHING with a credit card and pay it off at the end of the month. In doing so I reap free gift cards (from Citi's Thank You Network).
By the looks of things, however, it seems like that will change soon. Even as early as 2006, if I remember correctly, credit card companies began to cut back on rewards programs.
]]>That doesn't bug me at all. If the companies had to pay taxes they would either A) go out of business or B) pass the taxes on to their consumer and/or lower operating costs by slashing jobs/salaries etc.
The problem is that poor people vote. Politicians have learned if they can steal money from one group and give it to a group of irresponsible collective known as life's losers. It's such a shame that success is punished in this country.
My answer: eliminate income, capital gains and corporate taxes and institute a national sales tax.
]]>@linus:
I read that report too, but it said that 50% of corp. avoid paying corporate tax. Many corps. are set up as S corps or LLP so that the profits pass through to the individual and they are taxed at that level (like a salary).
But I agree that the tax system is set up to discourage saving.
]]>I just fire back with "Houses are forced savings accounts and, when taken care of, are never worthless. Sometimes they may be hard to get rid of
It's kind of like people who invested in silver in the late 70s and early 80s. People made fortunes and then lost everything. It happens.
I'm a bit of a frugal guy by nature. In college I worked two jobs and had to get by on $200 a week net. Since then my income has increased quite a bit but my needs really haven't. Outside of paying off student loans and a car loan I probably shouldn't have gotten but I'm not upside down in my costs to live haven't really gone up. I just have resisted the call to spend more.
What I am hoping to see is that people will someday return to the days of being frugal and buying high quality furniture, appliances and the like. When you can't buy a good toaster (even at the higher price ranges) why even bother anymore?
]]>I don't think credit is evil and we still have credit cards that we use for travel or purchases that we want extra protection on. But, for the last two years we have changed our habits and only use debit for day to day purchases, we have a spending plan that guides how we spend money (kind of like a budget but not as hard core), we paid off $55,500 in debt (half student loans/half credit card debt) and we only have mortgage debt now, we have $20,000 in our emergency fund. When we want to buy something expensive (i.e. a car, furniture, vacation, etc.) we save up for it. We don't live like hermits or anything like that we just live more like our grandparents in that we use debt as a tool to finance appreciating assets and we use cash to pay for depreciating assets. Any purchases over $300 have to be discussed and agreed. Our new system is wonderful, we have so much more money and less stress.
]]>Now of course we're talking about income taxes. Depending on where the corporation has property and real property, there are property taxes (at higher, non-homestead rates), use taxes, inventory taxes, and all sorts of taxes. There are lots of laws that can reduce these liabilities, but the fact is, in the end, someone is paying all of these taxes.
Just because a company doesn't pay income taxes doesn't mean that a company isn't paying lots of other taxes, or making it so that other people pay those taxes.
]]>@barty: You have no idea how much our tax system upsets me. There was a report yesterday that 50% or more companies legally avoid paying taxes.
Right now, if you own a reasonable home, are responsible, save money, and do all the right things people should do, you end up being penalized to pay for people who got into more debt then they could handle, pay more in taxes to give money to those who didn't want to get insurance, and you're expected to feel good about it.
I'm at a loss why politicians don't understand basic economics let alone basic mathematics.
]]>So they think the money just grows on trees, anyway.
]]>That's a great idea. You can start with Congress.
]]>not sure about the rest of you idiots, but ours ended years ago, and on our own terms.
]]>Maybe we should teach personal responsibility in school. And personal finance.
]]>You'll probably find a few more bucks in the bank at the end of the month too. People just tend to spend more money when using credit cards.
]]>My wife and I just paid off our car and paid off the last credit card a couple of months ago. We are going to do our damnedest to make sure we never go back to the debt lifestyle again. If we need to replace a car, we'll just save for a year and buy a used one. We've got emergency money put away already and everything else we could possibly buy outside of the necessities of life and routine maintenance on the house and car are lifestyle purchases.
People have got to get away from the mindset that they "need" debt to support everyday living. I'm absolutely convinced that the ONLY debt that may be absolutely necessary in today's society is a mortgage on a REASONABLE home. Even then, someone shouldn't be buying one without putting a sizable down payment on one and steering well clear of any of the funny mortgage products that have gotten us to where we are today.
]]>Our tax system is set up to discourage people to save. If you get a raise, you're taxed more. You earn interest on your savings, you're taxed. You put money away into an IRA, you're taxed.
It's no wonder we're so credit hungry! We don't get taxed when we borrow money. Of course, it's outweighed by the interest we pay on the loan.
Does anyone else see this as a government problem and not a consumer problem?
]]>With the credit crunch in full force I don't believe anyone should trust any money lending institution outside of immediate family. Banks are run by humans and they have made grave mistakes the last 5-7 years.
]]>Also, many people, on purchasing items that will serve them for the long-term, are cheap. While there's nothing wrong about being cheap, those kind of practices might not save them any money because they'll end up replacing the cheap product for a bigger combined price than it takes to buy the high-quality product (that won't break) all together. Take a Kirby Vacuum cleaner, for example. I shelled out a pretty good fortune for mine, but it has been serving me very well for years, much better than my cheap-o vacuum cleaner I bought before.
]]>The reality is that I blew a lot of money over the past 30 years. The soon (please!) ex and I owe $36K to the IRS. I'm on a super tight budget. Now, I use coupons, watch sales and spend less. I keep the air at 78. I buy clothes on sale. I never buy retail. I save money and I work at a big box store. You do what you do to survive.
]]>Aint no big deal.
]]>The consumers that are spending every last dollar they have and borrowing more to buy more stuff are simply doing it because they know that their money is not worth anything and becomes less valuable every day.Oh, like federal budget spending and the deficit. I get it! (I guess you can't blame the kids when the parents started it.)
"half of americans carry high interest credit card debt" Do you have a source on that, I couldn't find one.
I need to slightly revise - "68% of Americans who have credit cards carry high interest credit card debt."
According to this MSN article, which gets its facts elsewhere, only 31.2% of cardholders pay their bill in full each month, meaning over 68% of cardholders carry a balance.
When you consider that something around 25% of households don't have a credit card, the overall number is actually less than half of total American households carry a balance each month. My apologies, I "misremembered" that statistic. I hope I didn't come off as trying to intentionally mislead.
]]>But credit is fine as long as people don't overextend themselves. Credit is what built the modern world, by financing infrastructure projects and such. The problem a lot of people have is overspending, not credit. Credit just makes it easier to spend more than you have, but it in no way forces you to. You don't have to take a loan just because some idiot is offering you one.
I've got no argument with you there, Johnva. Reread my statement - "...rampant misuse (read: overuse) of credit has put us in a near-recession..."
I have no problem with credit, when used appropriately. I personally prefer to have no debt though, so it's my goal to pay off my current debt - house and two student loans - and never go into debt again.
]]>So many try to live like the rich and famous on credit, all the while destroying their financial lives forever.
It's easy, use credit for emergencies or pay off whatever you spent that month, or dont spend at all unless it is cash.
If you are already in the hole, dont pay the minimums either! you are just paying off the interest alone, you will never, ever, pay it off. That is how the banks make their money. Think of APR as a monthly fee for using their money that you get to pay every month you have debt.
]]>It seems to be this mythical thing, that in this country can be issued to 2 year old infants, and the family dog, but a twenty-something young person with a few years of bills behind them cannot seem to get.
It continues to confound and confuse me. Oh well, it keeps me out of CC debt, at any rate.
]]>@JamieSueAustin: Great idea! I'd love to see the Consumerist start writing guides on how to pick out quality items.
]]>But you're right about crying wolf. To date, many of the complaints here have been about relatively mild problems. "...ain't seen nothing yet."
]]>Boy. Cries. Wolf
]]>You know, (in mentioning vaccuums grandmother had a kirby for 30 years) I know this sounds stupid, but in the age of "everything's plastic" I honestly couldn't tell you how to choose a quality product anymore. I mean, I research (probably more than others), I read reviews online, I do what I can to make good decisions, but in the end I usually feel like I've made a mistake. There's so much out there and no really good way of condensing the information. I want to buy a new couch but I'm terrified to. They are expensive and I'd want to by the best quality one possible within my price range (I could give two shits about style so I'm not the type who will care if it goes out of style) but have no clue where to start. I searched for decently priced wooden (not pressed wood!)bookcases for ever and couldn't find anything affordable. Luckily someone gave me some left overs from a school and they are wonderful. I think the consumerist should take a stab at educating people how to make wise purchases. Some of us have lost or have not been taught the skill.
]]>I think that people have just been reacting rationally and intelligently over the last 40 years. Here's why :
Our government ("R" or "D",it doesn't make any difference),has been inflating and depreciating our currency so persistently that you would be a fool to save money instead of spend it on goods and services. Everybody has their panties in a twist about our "negative savings rate". Well, you could have put $100 in a savings account in 1965,guarded it like a hawk , never spending it, and ...And it would be destroyed by inflation and taxes.
A point to illustrate this. In 1971,my uncle bought a house with a FIVE HUNDRED NINETY SEVEN DOLLAR monthly payment for $76,000 . My dad told him that he was crazy,reckless and irresponsible for having such a ridiculous payment every month and such a whopping loan. Well. That house is now worth a lot more money (in todays dollars-lite) and he still lives there.THAT is how you beat inflation. The consumers that are spending every last dollar they have and borrowing more to buy more stuff are simply doing it because they know that their money is not worth anything and becomes less valuable every day. (This is not tinfoil hat,anti Federal Reserve stuff I'm talking about here,this is mathematics) yeah, some people want to impress the neighbors with their "stuff pile".Thats been going on since Fred and Wilma got a nicer cave than Barney and Betty.But when you consider how little our money is becoming worth,does it surprise you that consumers are spending it and not saving it ?
]]>Credit, used smartly, can be an excellent thing. And it doesn't take too much smarts, and only a little self control, to learn how to differentiate between good credit uses and bad.
I'm young, have a mortgage I can afford, and think I live in a much better world than one where I didn't have access to credit.
]]>broke and have no access to credit
Yep, that's me. No more bling for a while.
]]>@RandomMutterings: It's just courtesy to the customer.
]]>Cash is king though. You have to have it to spend it, and as a bonus it allows you to live in anonymity without every purchase going into your government and commercial dossiers. A future where cash isn't accepted is a much scarier proposition than one where credit isn't accepted. I'm not against credit, I'm just conservative about its use.
]]>Yep - the real answer will lie in what happens after that disposable income goes back. If we go back to what we're just now getting away from, then no this wasn't the end of credit card consumerism.
]]>Something has to give, and the "un-necessities" are first to go. If it costs more to fill up and put food on the table, then maybe I don't need to augment the old DVD collection, etc.
]]>I think the real issue with the real estate crisis is that so many people justified overspending on credit with the totally wrong idea that real estate prices would never go down. I can't tell you how many times I've heard people say that "real estate is the best investment", "houses don't go down in value because they're something tangible", and similar stupidity.
]]>
Of course, if you're broke and have no access to credit you don't have much choice but to be frugal
what "FreeCreditReport.com" would have you believe, some people do choose to drive them. And they also get their credit reports from www.annualcreditreport.com.
I prefer the 40 cents I get back from Amex Blue Cash on gas purchases.
]]>I dont understand all the hate on credit. Its been around in one way or another since ancient ships sailed the Euphrates. For a site calling itself the consumerist it is surprising the amount of gleeful ignorance around this place.
i love the 10 cent discount cash gets me on gas :)
I love the 5% discount my AMEX Blue gets me on gas, groceries, and pharmacy :)
17.5 cents per gallon (assuming $3.50 per gallon gas)
]]>@kaptainkk: See, that's why not carrying cash has helped me! Most of my favorite, greasy lunch places are cash only. Having only my debit card and too much pride to charge $4 at McDonald's keeps me from eating junk and instead going home and making a sandwich or salad for lunch.
]]>You can still buy a Kirby vacuum cleaner, but it'll probably run you about $1500. You'll definitely only need one though.
My mom's Kirby (circa 1975) still works like a charm, but it's like hauling an anvil around if you have to change floors.
]]>"Despite what "FreeCreditReport.com" would have you believe, some people do choose to drive them. And they also get their credit reports from www.annualcreditreport.com."
Great line. I'm sure the rising gas prices have something to do with people curtailing their spending.
]]>@GMFish: Americans have had disposable cash, but not disposabile income. If this was all about income, we'd all still be spending like sailors. The problem is that most Americans have been spending beyond their means (i.e. beyond their income) for years, and using cheap and easy credit to do so.
]]>Credit will die when it's not easy to get or not profitable to provide.
]]>It was ugly it was slow, and the handles for the windows eventually came off but in nine years, that car never once left me stranded on the side of the road. I bought new brakes and new tires and had the oil changed regularly and it was one of the best decisions I ever made. My friends teased me about buying a rolling hamster but I am glad I had the sense to buy only what I could afford. I still try to live by that philosophy even now that I can afford something fancier.
I love you, Blue Geo Metro, wherever you are!
]]>Nope, we're nearing the end of an era where US citizens had disposable incomes.
]]>But really, I know exactly what you mean. That thing sounded like a jet taking off; we'd find the cat hiding in the attic hours after the fact.
]]>I have, CiCi's Pizza is cash only here in northwest Georgia. They have a small ATM, but accepts cash only.
Funny how many people, like my family, use debit cards and not carry cash. There are a lot of people just turn around and walk out like we did.
]]>"Is credit card consumerism over?"
I would give that a big, fat NO.
As in customers being told, "No, you don't have any more credit. No, we won't raise your limit. No, your house is no longer an ATM. No, nobody will buy it because you owe more than it is worth. No, you can't have that."
If there was more credit, they'd spend it. We are bling-loving debtor nation, believe it.
]]>@friendlynerd: Funny enough, I use my parent's Electrolux that they recieved as a wedding gift 30 some years ago....they replaced it with several yard-sale Electrolux's that my mom picked up...
]]>My first car was a bike. And I rode it everywhere in New Orleans.
And I've been to a few places in Austin that don't accept credit cards. Although I hope they would accept debit cards.
]]>How old is your vacuum cleaner? How old was your last one before it shit the bed? Even when you want to keep things around they're not designed to be fixed anymore.
]]>I sure wouldn't be paying that diner anything if I was informed after the fact.
]]>