Credit Cards » Credit Card News » Consumer Borrowing Falls, Smart Spending is the Order of the Day
Date May 9, 2009

Consumer Borrowing Falls, Smart Spending is the Order of the Day

Consumer Borrowing Falls, Smart Spending is the Order of the DayThe economic recession, the rise of unemployment, and the fall of the property markets have hit the country quite hard. For the average American, the reality has been rising loan rates, the risk of losing homes, and the threat of unemployment. As a result, every American has had to rethink the way they spend their earnings.

Today, Americans around the country are moving away from their old, consumer-driven spending habits. The order of the day for most Americans is now spending smart. It seems that frivolous spending, a common practice just a few years ago, is now on the way out.

Paco Underhill, an expert in consumer psychology, has stated that the consumer mindset is undergoing a major change due to the recession. He was recently quoted saying, “Our retail culture is in a major transition. Conspicuous consumption is now bad manners. Too many of us have spread ourselves far beyond our means. We can’t do this anymore.”

“Our closets are full, our houses are too big, we have too many cars. It’s time to make some very wrenching changes,” he further elaborated.

It seems that American spenders are doing just that. A report released by the Federal Reserve last Thursday shows that consumer borrowing dropped to $11.1 billion this March. Reuters had earlier polled industry analysts who had expected consumer borrowing to drop to $3.5 billion for March. The annual rate of consumer credit fell to 5.2% this March. This totals $2.55 trillion. Not since December 1990 has consumer credit percentage dropped so low.

The drop in non-revolving credit was to the tune of $5.7 billion, which is equivalent to a 4.2% rate, to $1.6 trillion. Non-revolving credit encompasses closed-end loans, such as those taken out for holidays, cars, boats, and college educations. On the other hand, the drop in revolving credit in March was at $5.4 billion, which is at a rate of 6.8%, to $946 billion. Revolving credit is composed of borrowings from credit cards and charge cards.

The sales figures of major retailers for April are also quite telling. Discount stores and supermarkets are winning out against their more high-end competitors. From food to clothing purchases, most Americans are moving towards where the best value is. Consumers are beginning to recognize the importance of holding on to their dollars and are being very careful in their spending. As a result, previously scoffed at buying practices such as buying pre-owned items and “private label” store products are becoming more and more the norm.

The appeal of high priced, luxury branded goods is also beginning to wane.
The changes in buying behavior have its positive and negative effects. Some retailers, for example, are being hit by the change in consumer practices. Clearly, they will have to adapt to this new consumer behavior trend or risk losing everything.

Date April 21, 2009

Prepaid Credit Card Use Continues To Rise As Consumers Attempt To Avoid More Debt

As the credit crisis continues there are more and more people looking for ways to reduce their debt or avoid going deeper in debt. As a result, the use of prepaid cards is soaring by an expected 3 billion more dollars than last year. The reason for this increase in popularity- consumers are looking for the convenience of traditional credit cards without the risk of increased debt.credit-cards

Prepaid credit cards are not new in the industry however in previous years they were most attractive to people who either chose to not use unsecured credit cards or people trying to build credit. Since prepaid cards use the consumers own funds to establish available credit, credit history is not as big of a factor when applying for a prepaid card. For consumers who have good credit, the option of having a credit card that puts a cap on their spending (without incurring more debt) is very appealing in the current economic climate.

As prepaid credit cards continue to rise in popularity, consumers should know that using this type of card is not without a downside. While you provide the funds upfront, there are fees associated with the account. Consumers can expect to see application fees, processing fees and various other fees that can quickly reduce the amount of money you have remaining on your card to use for purchases.

If after reading the fine print on your prepaid credit card application you decide you are not willing to pay money to use your own money, you may consider looking  into other ways to prevent incurring more debt. Adjust your spending habits, cut costs and seek out other money saving strategies if using a prepaid credit card is not for you. Other consumers who do their research and find a prepaid credit card that has reasonable fees may be willing to pay a few dollars to have the convenience of using a credit card for purchases that otherwise would require a payment at the end of the month.