Credit Card Usage Is On Fire Again

Camp FireAccording to First Data, credit card usage was up 8.2% YoY in 1Q2011, 9% YoY in 2Q2011, and 10.6% YoY in 3Q.  If those aren’t healthy signs of consumers spending again, I don’t know what is.  What’s a little more shocking is that the latest November industry-wide car sales figures are up 14% YoY to 994,000 according to Auto Data Corp with Chrysler leading the way up 45% YoY!

CNN recently highlighted that credit card mailings have surged 85% since the beginning of 2010 to 1.3 billion credit card offers in 3Q2011 and that online credit card use will increase by 63% from 2011 to 2016 according to Javelin Strategy & Research.  There seems to be no stopping the use of credit cards is our daily lives.  If you are a cash only man, you’re missing the great big bandwagon!

It’s becoming quite clear to me that the US consumer is alive and kicking with money to burn.  Some may even call it the start of a bull market!  We’ve been frugal for long enough and what better time to start spending money than during the holidays?  I recently reported that I spent around $1,700 gross, and $1,010 net after reimbursement on my personal credit card in November, 2011.  I definitely feel that I’m spending more than 10% over last year, perhaps more like 25% more.

Besides looking at the hard data, I’ve asked all my friends and family whether they are spending more this holiday season and the general answer is yes.  I’m curious to know whether your credit card spending habits have picked up by 10% or more vs. last year as well.

One female friend who makes about $70,000 a year bought herself a $3,500 Louis Vuitton handbag on credit card.  I think that’s nuts, but guys spend tens of thousands of dollars more on cars than they need, so oh well.  I  bought myself a pair of $315 Tod’s handmade loafer shoes for work, which were on sale from $485.  I also think this is kind of nuts.  I’ve wanted a pair for 5 years, but could never bring myself to spend more than $150 on a pair of work shoes.  This year, I said what the hell.

The real issue is whether or not these healthy retail sales numbers will continue through the new year, or fade?  I’m seriously considering returning my shoes because I feel too guilty spending double what I normally pay.  There’s a good chance other people might feel the same, it’s just a little too early to tell since we’ve all got a 30 day return policy on average!

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Photo: Lake Tahoe Camp Fire, Sam.

Best,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    While this may bode well for the economy in the short-term, isn’t this addiction to credit a real negative in the long-term? All the money we lose in debt-servicing costs could be used to jump start more economy-friendly industries. Canada keeps reporting that our household debt levels are climbing to more dangerous levels every quarter. We are now kicking your guys’ butt! We are more addicted to debt than the vaunted “American Consumer” Woohoo!

  2. says

    1.3 billion offers? Does that mean there are 1b illegal immigrants in the US? Before you know it some financial advisor will write a book about how he walked away from his credit card debt. You can’t say the banks don’t see it coming.

  3. says

    I don’t think spending is permanently back. I think it might be a minor binge due to frugality fatigue. Of course, I could be wrong.

    Personally, I am not spending any more since I am trying to eliminate some debt. For me, that process will continue for the next few years.

    I have noticed getting a ton more credit offers in the mail. It is almost to the point of getting annoying again.

      • says

        I haven’t been getting many more offers, however, I have seen a plethora of them online. The companies are trying to appeal to our economic stringency by offering amazing incentives. If you’re careful you can really score with their deals. I know I have! I get hundreds of cash back and never leave a monthly balance.

    • Michael says

      I agree – my wife and I are more frugal than we’ve ever been and holiday spending is not the norm for us. We use coupons regularly and try to purchase wants when items are discounted. It’s sort of like stuffing your face on Thanksgiving – it’s just one day and feels darn good, especially if you’ve been eating healthy leading up to the feast.

    • says

      It may be the effect I wrote about on my blog earlier this week. When someone wants to buy something you can scare them into waiting a bit (which then makes its own headlines about how no one is buying anymore) but it’s a lot harder to actually change their mind. If there is more positive news than the media is reporting maybe people are running out of reasons to delay purchases.

  4. Michael says

    Credit card use is always high this time of year as my wife and I use them to purchase Christmas gifts for family. Though I haven’t run the numbers, I would say we’re on track to spend about the same as last year. We both work and our expenses are low so we’re happy to be able to buy gifts for everyone this year.

  5. says

    I’m spending less on credit this year, but that’s a conscious choice I’ve made not to use credit. Overall I think my spending is about the same, I just prefer to do it on debit instead.

    For the US as a whole, I’m not the least bit surprised that credit spending is up. It seems like credit is becoming more and more a part of American life every day, regardless of the economy, and I don’t see any sign of that slowing down.

  6. says

    $1,000 in a month? Is that with your partner’s spending? That’s pretty solid in San Francisco, so if so I’m here to give you props.

    I’ve been spending about the same as last year, other than the whole getting married thing. I’d say I’m bullish, just like you.

      • says

        Yeah, I had read that one and you had said $1,500 – $2,000 with that spending. So if you spent say, $2,000 with $700 reimbursed, you’re talking $1,300 in the city.

        $1,300 is a good number, as is $1,500 (as in: I would expect it to be more in SF in the holiday season).

        On a side note, my sister is living in the city right now and she told me that minimum wage is moving to $10.50. She claimed it’s the first place nationwide with a double digit minimum wage. What could possibly go wrong?

        • says

          Whoops, donno why I wrote “mean”, I meant to write “Just me man” for the $1,000 goal. It floats to $1,500-$2,000 sometimes, but I’m definitely try to keep it down w/out crimping. Fine balance.

          $10.50, good news! More taxes revenue!

  7. says

    I think I am spending about the same or up a little bit. The difference is I pay my credit card in full each month vs. the vast majority of consumers.

    I saw something about people returning things they bought on Black Friday because they changed their minds or were caught up with the hype. Could this be a trend? Sales are up, but did people go into debt for the purchases? I think I heard consumers were using more cash too. Time will tell.

  8. says

    For me, just a little more. The biggest drive was that my son (who is 11) wanted a laptop. I found a bargain on a 4 core CPU Samsung at Best Buy for $375. At the low end, this laptop will rock when it comes to gaming. While some of the top games won’t work, most of the rest will :)

    It’s good to hear spending is increasing, I bet a lot of people were sick of being frugal… But I’m going for value too. I could have bought a similar looking laptop at $299, but it would have only been 1/2 of the laptop I bought! Technology is tricky… Caveat Emptor :)

  9. says

    We’ve spent a ton this month, but it has to do with my husband finally graduating from the fire academy (hello, celebrations!), then him starting his new job an horu away (gas money, food money) and also the holidays (one present for you, one present for me, one present for you, one present for me).
    I am looking forward to finally having a second paycheck so we can pay it all off!

  10. says

    Great post! I’m spending less this year than I ever have before, and not because I have to so much as I’ve changed a lot of attitudes/behaviors (like no longer going food shopping hungry or stopping off at the mall on the way home from work). That being said, I’m headed to the outlets tomorrow to do my Xmas shopping so we’ll see if I spend more than last year! Although I think I will spend just about the same. I also put my credit cards away in May this year. I used them a few times since, but I mostly just use debit and cash. I’m not getting any rewards points but I’m also paying less interest.
    Your confession of buying Tod’s loafers made me laugh. I say keep ‘em. It sounds like you can swing it.

    • Michael says

      I’ve begun to do the same. Keep the accounts open, but cut up my cards. Large purchases can wait until an emergency card is shipped to me. Buys me more time to change my mind, too.

  11. says

    I think it’s great that we are spending again. That’s exactly what the economy needs. We spend a lot of money in November because we had visitors. For Christmas, we are not buying too many things. I promised to take Mrs. RB40 to go shopping the after Christmas sale though so there is still opportunity to spend before the year is over. :)
    I think we spend about the same amount as last year.

  12. says

    I think we’re putting more on the credit cards this year than last, but that’s because the end of 2009 and 2010 were all about getting out of consumer debt for us and making sure we could live on a single salary.
    We’re in a good spot now, and so I use the cards to get points (hello $100 gift certificates), but pay them off every month, so we’re not paying any interest.
    That and this year we lost one dog (so vet bills), got a second dog (adoption fee) and then had medical issues with our other dog (omg the vet bills). I put those on the credit card and then pull out of the EF to pay them off. (Carify- EF wasn’t used for the adoption/start up fees for new dog, but since we weren’t sure what costs would be, it went on the card and budgeted in the payoff.)

  13. says

    hard to tell. market reports are very positive for retailers, but that just tells the sales / revenues story. decreased margins due to giving away product for free is hurting many, including BBY who dropped 25% i believe in the last few weeks. from a consumer perspective, people are certainly spending more (maybe it’s tax payroll tax cut LOL), but don’t think permanently.

  14. says

    Personally, I know i’m spending a bit more – I’ve been planning a honeymoon and a wedding, so there are things that I need to buy, fees and all of that. My spending is still flat over the last 9 months, though. Will try and lower for the first half of Q1!

  15. JR says

    Interesting to see some more solid data on the overall spending. I am curious how that spending fits in w/ actual planning. To wit, are folks budgeting for what they are spending? Additionally, is this increased spending also indicative of increased hiring? Just some thoughts I have as I think about my own situation.

    As to my situation, I think that we are spending a bit more this year. But that is mostly related to some changes in household and job(s) (i.e. commuting) than to transient things like Holidays. We usually use CC for most everything; to the point that if we need cash it takes us a moment. Then again, we have a serious budget and everything is tracked and checked. Frequently. Anything over $50 gets a budget plan after a serious discussion.

  16. says

    I think you shouldn’t feel guilty of buying new shoes because I am sure that you are a hardworking man. It’s good to reward yourself! Even if they are a little overpriced for shoes!

    Anyway, as for credit card spending, those numbers are astonishing! I think more than half of credit card spenders don’t have the money to pay it back. They buy things on credit to make themselves feel richer than they actually are. But, it does seem as if my credit goes up during the holidays every year, though.

    • says

      You think it’s that dire? More than half can’t pay their bills, or pay them in full?

      Price is all in the eye of the beholder for shoes. I went to Ferragamo and tried on $685 shoes for fun and suddenly found Tod’s to be so cheap! lol

  17. says

    I would like to see how the avg credit balance metric has changed. If more people are caring balances or higher balances that tells me something different vs. increased spending.

    I have moved a lot of my convenience purchase away from cash since even my own bank hits me for foreign ATM fees and I refuse to waste money like that thus I charge more.

  18. Marissa @ Thirty Six Months says

    I am spending a lot less than last year, but that is done in a conscious effort to reduce my credit card debt.
    The only things I use my card for now is automatic payments, and gas- then I promptly pay the balance off at the end of the month.

    Also, Toms on sale? Nicely done. My sister just got her first fair and she is the same size as me so I have been “borrowing” them.

    • says

      Haha, nice. I’ve been looking for at least 3 years, if not 5 years for some Tod’s shoes on sale. Couldn’t believe my eyes when I found em. Do you carry revolving credit card debt or do you pay them off?

  19. says

    Sam how could you not bring Europe into this, the world is ending because Europe is all that counts these days…this is too positive of a post for the current mainstream media.

    Having said that…yes I will definitely be spending more than last year on my CC as I plan on getting myself one of them android tablets!

    • says

      Im quite annoyed that Europe is holding the markets hostage. All the signs point towards a recovering consumer and as a result, i see a positive year for income, labor and te markets.

      Enjoy your tablet. Why not wait for iPad3!?

      • says

        I like open systems like Android, so I do not see myself ever buying an iPad …
        Though it might be worth waiting for Samsung to release
        its next gen galaxy tablet, Samsung imo is top notch quality in mobile devices
        as I worked with their products for years….

  20. says

    Our gift budget is 50% less than last year.

    But last year was somewhat of a family reunion, so we bought more gifts for family members that we would otherwise safely ignore :-)

    $3,500 for a handbag? Still can’t quite wrap my brain around that one.

    • says

      Then there is the $6,500 Grace Kelley Hermes handbag… and then there’s the $10-20,000 Bottega handbags and they go on and on.

      She makes $70,000 which is OK in SF, not great. And she complains why things are so expensive in SF…..

  21. says

    I think I’ve spent more this year but not by a huge amount. I didn’t buy anything on Black Friday last year but spent a few hundred dollars this year restocking on some things that had worn out and needed to be replaced.

  22. Simple Rich Living says

    I have started to ‘splurge’ on myself yet but do plan to pick up a few things (shoes and jeans). I am pretty good at avoiding to going to shops to avoid spending money. It’s I am already in the mall that I get tempted to shop.

  23. says

    I read that quite a few people took back items they bought on Black Friday for a refund. Buyers’ remorse. In our family we have cut back on the number of gifts, but somehow we ended up spending more. And the grandmothers decided to give checks to their grown grandkids this year. Maybe they decided that you can’t take it with you.

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