Tuesday, March 8, 2011
At a time when frugal spending represents a smart and even necessary financial strategy, the lure of holiday spending showed that Americans still have not embraced living within their means.
Four cases in point:
- A Federal Reserve consumer credit report showed revolving debt, made up primarily of credit card debt, grew in December for the first time in 27 months. The 3.5 percent increase, measured at an annual rate, include charge-offs, or uncollectible debt, from credit card companies.
- First Data, a private company which processes transactions for merchants, reported all card spending grew 6.5 percent in December from the previous year. First Data follows credit, debit and electronic benefit transfers cards in its calculations.
- Overall holiday spending, MasterCard Advisors SpendingPulse reports, increased 5.5 percent in the seven weeks before Christmas 2010, compared with the 2009 holiday shopping season. Clothing, jewelry and high-end items were credited for the gains.
- Credit card companies Visa and MasterCard noted that spending in the United States jumped a combined 8.3 percent for the fourth quarter.
Despite the spending increases,the credit card monitoring company Experian reported the average debt on credit cards held by American consumers in December fell 4 percent, compared with year-ago figures. Still, the average credit card statement was $4,284 in December 2010, Experian said.
"You've got people who already had good credit and were pretty much managing their credit, and because of the risk, paid down their debt even more," said Maxine Sweet, Experian's vice president for public education.
The mixed data details that a rebounding economy left some consumers feeling confident enough to spend more during the holidays. Others, however, lacking economic confidence because of job losses, crushing mortgage payments or other financial concerns, used credit cards for life's basic needs and expenses. In either case, retailers view increased credit spending as a positive sign.