With Republicans in Washington D.C. on the verge of passing their first major piece of legislation in the form of comprehensive tax cuts that will allow Americans across the income spectrum to keep a little more of their hard earned cash in 2018, it appears as though eager U.S. consumers may have already “pre-spent” their savings on their credit cards.
As the folks at Gluskin Sheff point out, 13-week annualized credit card balances in the U.S. have gone completely vertical in the last few months of 2017 which should make for some great Christmas gifts for little Johnny and Susie…gifts that will undoubtedly find themselves tucked away in a dark closet, never to be seen again, by mid January.
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Of course, as we pointed out earlier this month, the latest Fed data revealed that total consumer credit rose by 6.5% Y/Y, rising to $3.802 trillion as of Oct 31. That number is more than double the rate of increase of US GDP or wage growth, making it clear just where America’s “purchasing power” comes from.
Finally, this was also the single biggest monthly increase in consumer credit since November 2016.
And while nonrevolving credit reached a fresh record high of $2.791 trillion, revolving – or credit card debt – is now back well over a trillion dollars, or $1.011 trillion to be precise, and fast approaching the all time bubble high of $1.02 trillion hit in the summer of 2008.
So, what hot new Christmas gadget has Americans suddenly willing to max out their credit cards? Well, if Google search trends are any clue, it might not be a gadget, or anything tangible for that matter, at all…
h/t @lisaabramowicz1
“Pre-Spend”. Doubt there’s much more lipstick to put on this pig of a financial system.
How much of this credit card debt is going to be carried long term and how much is going to be paid off over the next month or two?
It is the Holiday season and buying almost everything on credit cards instead of using cash, especially online, has become pretty much the norm for most people.
Rising longer term balances I see as something to keep an eye on, maybe a concerned eye, but short term ones I don’t see that way in today’s world.
The charts are showing the revolving balances. The charts are showing a relentless rise. It has absolutely nothing to do with the holidays. The average revolving balance is over $12,000. How do you pay-off credit card debt rising at 6.5% when wages are growing at 2.5% and your healthcare costs are rising at 30%?
Do the revolving balances take into account monthly pay offs or just the national average balance at any given time regardless of how long it is carried?
I’ve often had average balances of 10 grand but never carried a balance from month to month because I put almost all of my business spending as a sole proprietor on credit cards. It made sense to me to charge everything and have a high balance since paying off old and acquiring new every month along with those interest free loans they keep pushing essentially gave me an interest free loan to operate on.
FWIW, I don’t do that now since I am mostly retired and never let myself get in a position where where I didn’t have plenty of cast to make sure of being able to pay it off every month when I did.
It’s the total outstanding balance at the given time. If this was just a holiday impact it would decline in January. It will not decline in January, just as it hasn’t declined in January since the financial crisis. It relentlessly marches upward at a greater rate than income growth. Consumer confidence has been dropping. This would indicate the credit card balances are rising because they are using them to pay for healthcare, rent, food, taxes and the other daily essentials. That would also jive with 7,000 retail store closings in 2017. All is not rosy.
I use my credit card the same as you – paying off every month while accumulating $11,000 in a 529 account for my son’s college expenses. We are the exception, not the rule.
I trained my son from toddler stage. When we passed bubble gum machines and he asked I said “Let’s send you to college and save your teeth.”
Bachelor of Science in CompSci and not one cavity.
The only thing I’ll be pre-spending is paying my goddamn 2018 property taxes in 2017 so that I’ll be able to write them off for one last time. Now I just need a greater fool to buy my hog of a house that we’ve outgrown. Not sure there are enough fools, though.
Sell it to a Somali. I’m sure one of the big banks will loan them 120% of the home value under some government diversity program.
Credit cards are financial death and the level of debt one carries is directly proportional to the degree of personal enslavement one is willing to accept.
Starting with Generation X (1965-1984), then adding Gen. Y, then Millenials, these groups of people are generally using their Credit Card (CC) to pay for everything. There is no mental barrier to not buy as compared to generally buying with cash (there are emergencies which are an allowed exception).
I would expect these people to suffer financially due to maintaining CC balances and paying high interest expense.
It spells trouble for the citizens and wealth for CC companies.
I just got home from Kohl’s. I spent over 300 but after all my Kohls cash, coupons and 30% off for using my Kohls card I walked outta there at $88.47.
Then I went to Shoprite in Ramsey, NJ and bought 10 avacados at 1.67 each and 2 lemons at .39 each. I went thru the newly installed self checkout and told the computer I had 1 avocado and 1 lemon, I left paying 2.06. Yes I know I stole, but its food and Christmas so fuck it! When aren’t they stealing from us ??
goofy…..be careful, cameras are recording activity at every checkout – the detail and resolution are impressive. If they noticed your cheating, they probably let the small stuff go; but if they catch you again, it’s the guys in blue.
Goofy, ever heard the phrase “Two wrongs don’t make a right”?
Stealing is stealing, what you put into the world is what you end up getting back from it.
You’re a thief goofyfoot. You ought to go back and pay for what you stole. People who do what you did and justify it by pointing to other bad behavior are part of the problem.
Greetings,
Here is what is going to happen. You will be marked as a thief and facial recognition, something being adopted across the board, will tag you as a thief everywhere you go. I have a good friend that works in loss prevention and that is the coming trend. In the same manner that a casino knows you are a card counter and wont allow you in, grocery stores will know you are a shoplifter and deny you access.
Good luck finding food.
Fuck. There goes my plan for offsetting the loss of state and local tax deductibility.
I hope LLPOH doesn’t see this, he will suffer immensely and might even burst a blood vessel or two. Ever read the book “When Bad Things Happen to Bad People” – it’s karma. And you wonder why you ate it at Glamis?
EC
We managed to remain debt-free and get our son through rocket science u with no loans. I went ahead and opened a Visa account with my son…lending him my 805 FICO score while I still have a good credit history…(just buy what you can pay off…is how it is done).
The following week he got 3 credit card applications in the mail. ALL had cash advance offers with teaser rates of zero% BUT 3% of amount borrowed for cash and transfer.
Predators.
You can usually negotiate that cash advance/transfer fee down if you have a decent history with the card issuer, sometimes all the way down to zero.
Most people don’t know this because most people don’t call their card issuer and try it. Just never enter the negotiation without being willing to walk away if you don’t get what you want, don’t do it when you really need the money and will end up accepting their terms because you do.
US Consumers Tap Out: Personal Savings Rate Plunges To 10 Year Low While Americans Splurge
by Tyler Durden
Dec 22, 2017 8:54 AM
The latest confirmation that the US consumer is now effectively tapped out came moments ago when the Dept of Commerce reported that in November, Personal Income rose by a lower than expected 0.3% (exp. 0.4%), while US consumers continued to splurge at an accelerated rate, with personal spending rising 0.6%, above the 0.5% expected, as Americans decided to splurge on holiday products and services.
However, and speaking of savings, therein lay the rub, because as Americans splurged in November – and much of 2017 – the personal savings rate continued to decline, and in the latest month it tumbled from 3.2% to 2.9%, the lowest since November 2007, which as a reminder is one month before the recession started.
This incidentally explains the surge in credit card usages we noted last night. As a reminder, the 13-week annualized credit card balances in the U.S. have gone completely vertical in the last few months of 2017, a troubling sign and yet another confirmation that US household savings are almost gone, forcing Americans to resort to savings.
What is somewhat strange is that this collapse in savings took place even as US wage growth actually surprised to the upside, with wage growth rising at 4.5% Y/Y (private rose 4.8%, government 3.0%), more than core consumer spending (4.3%) for the first time since December 2015.
And yet, despite this favorable wage background, Americans were not only unable to save but saw collective savings decline by $41 billion in November to $426 billion.
At this rate the Fed will have to step in and bailout the plunge in bitcoin or else risk a complete collapse in holiday spending.
It’s impossible to know for sure, but I’d lay the majority of this CC rise at the feet of the Unaffordable Health Care Act. This thing is absolutely KILLING people’s budgets, and the longer CONgress keeps screwing around, the worse it’s gonna get. That being said, many folks could also get by a little better if they cut-out the extras like cellphone plans, the cable bill, the payments on 3 cars, and the overpriced homes they cant afford, etc etc.
This is surely a great sign. Interest payments on debt soaring while savings rate plunging. Winning!!!!
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The first tax year ObamaDontCare went into effect, I got hammered – the tax bill for not properly guessing (a year in advance!) how much money I would make as a 1099 contractor was around $7500 ! We were forced to put it on plastic, and lucky that one card (had it since my college days) had room. It hurt, but you gotta pay the taxman so we did it.
We have paid off some and charged more, and are gradually whittling away on the remainder. My wife now pays us first (putting away 20% of net income) and we will hopefully not have such an impact this year either, but it looks like we guessed right (or at least close enough) for three years running, so maybe this year we will finally pay it off and start moving ahead again.
But then, this year the Repubbies rewrote the rules (again!) so who knows … I’m starting to wonder if dealing drugs is the only way to reliably beat the system. Then again, I like being able to look at myself in the mirror when I shave, so probably no go.
Damn them all, how are you supposed to plan when insanity and random variation is the system?