The Important Fact That Wasn’t in This Headline
My eyebrows peaked up when I saw the title of a story in the Wall Street Journal on Friday– “U.S. Consumer Credit Increased at Slowest Pace in 4 Years in June.” I said to myself, does this mean the trend on increasing consumer debt– from a major expansion in credit card debt that has brought levels to the level reached in 2008, just before the crisis– has declined?”
A quick read of the story indicated– no, that is not the case. In fact, as to credit card debt, it is the opposite. The article states, “Revolving credit, mostly credit cards, rose at a 9.7% annual pace in June, an acceleration from the 2.24% growth rate in May.” As to credit card debt, the lead to the article could state, “Credit Card Rate Quadrupled in June.” Had that been the title, alarms and bells might start ringing– something I believe is in order. The reason the overall rate declined is that student debt and car loans only increased 2.07% due to a slowing in auto sales. As to student loan debt, my guess is “June” is not the major month students take out their college loans. On that number, watch for the reports in September and October.
The important take back here is that we are drifting back toward the mistakes of the past. Banks are pushing consumer credit cards for one reason only: they want the high interest. Consumers– though burned in the financial crisis– are taking the cards and using them. It’s not hard to understand; real wage growth since 2008 is almost non-existent and is far below the cumulative impact of inflation (as low as it’s been). For many, it is simply too hard to resist the barrage of credit card offers. On top of this, the economic pundits get excited by only one thing– increased consumer spending– because that creates jobs and economic growth. The problem, however, is when the growth arises simply from increased consumer debt. Who do you think gains and suffers in the end?
There is a silver lining. If you have already become the victim of too much credit card debt– or you fall victim to it in the future– be smart about it. Investigate your options to find out the fastest, smartest and least costly way to get rid of that debt. It just so happens, this is a major focus of our upcoming Free Seminar on August 24th, I’m Not Going Down with the Ship – Time to Ditch the Debt! Check it out below.
And don’t miss Law & Reality Live, which airs on WCHB 1200 AM/99.9 FM from Noon to 1 PM and 6 to 7 PM on Tuesdays as part of the Mildred Gaddis show, and Law & Reality “Now” with Cliff Russell, Thursdays from 3 to 4 PM on 910 AM. Also, be sure to watch the show on TV 20 on Sundays at 11 AM.
Enjoy the great weather!