Is this yet another bit of "unexpected" news?
Apparently consumer spending is down, again. It's at its lowest pace in two years and not getting any better.
While consumers haven't stopped spending, they are being more careful. They also have changed their spending habits, with more online spending and less in the way of trips to the mall. As one of Glenn Reynolds readers explained it:
One of the other things driving lower consumer spending is consumers paying off debt, getting those credit cards and car loans paid off. And when consumers do spend, they're paying cash or doing without. As Instapundit reader Robin Lyons writes:
Even though reducing the number of credit cards we have to one may adversely affect our credit rating, the missus and I much prefer to limit our exposure in the future rather than worry about what Experion and the others credit bureaus might have to say about us. Freeing up $12,000 of cash a year makes me feel a whole lot better than worrying about our credit rating dropping 50 points. It seems quite a few others are taking the same route we have, at least from what friends and acquaintances have been telling me.
So the fact that consumer spending has dropped isn't a surprise to me or anyone else paying attention to the Obama economy.
Apparently consumer spending is down, again. It's at its lowest pace in two years and not getting any better.
While consumers haven't stopped spending, they are being more careful. They also have changed their spending habits, with more online spending and less in the way of trips to the mall. As one of Glenn Reynolds readers explained it:
I realize it is a cliche for a woman to say she has nothing to wear; but I have literally only bought one new item of apparel for myself in the past three years. I had a pair of shorts that was more patches than original cloth, so I determined I had to buy some new ones. But after three years of mall avoidance I found the idea of going to one to be impossibly fatiguing. So I checked Overstock and Landsend (sic) clearance and bought myself some new shorts for about $10 each.I can't remember the last time I went to one of the malls to shop. It's either WalMart or online shopping for us here at The Manse. If I buy something I know what it is I want, where I can buy it, and how much it costs. I know all of that before leaving The Manse (assuming I actually go to a store to buy what I need). Otherwise we buy it online.
But of course since I was online I just typed in women's shorts and that's all I bought. If I had been at a mall I would have found a cute top and an adorable little skirt and etc. etc. My shopping habits have been completely altered, and I think its a good thing.
One of the other things driving lower consumer spending is consumers paying off debt, getting those credit cards and car loans paid off. And when consumers do spend, they're paying cash or doing without. As Instapundit reader Robin Lyons writes:
Instead of spending, I have been taking all my disposable income and paying off debt. I have a good job and have disposable income every month. But I have decided that I am not buying anything not absolutely necessary in protest of the Obama economy. Not that my single participation makes any difference, but who knows how many of me there are out there?We've had a tight budget here at The Manse over the past two years. After a mortgage refinance at a much lower interest rate, we're paying off all of our other debt and freeing up $1000 a month or more because we won't have those payments. Our mortgage payments will remain the same and that's the only debt we'll have, one we're willing to carry. From this point forward we'll be paying cash or doing without. We'll keep one credit card (the one with both the lowest credit limit and lowest interest rate).
Even though reducing the number of credit cards we have to one may adversely affect our credit rating, the missus and I much prefer to limit our exposure in the future rather than worry about what Experion and the others credit bureaus might have to say about us. Freeing up $12,000 of cash a year makes me feel a whole lot better than worrying about our credit rating dropping 50 points. It seems quite a few others are taking the same route we have, at least from what friends and acquaintances have been telling me.
So the fact that consumer spending has dropped isn't a surprise to me or anyone else paying attention to the Obama economy.
If you close credit card accounts it goes against your credit rating because I guess it signals that you aren't confident that you pay your credit card bills. On the other hand having too many cards can work against you too because it leaves you open to too much debt. It's a balancing act. But I'd rather just get rid of the damn things because open credit accounts leave you open to fraud if you aren't careful.
We have three cards now, one of them being a gas card. One of the 'regular' cards and the gas card are going away (we don't use the gas card so much anymore because there's only one gas station around here that takes it).
Besides, with one card we aren't tempted to use it for anything other than pressing needs like an unexpected car repair bill or unplanned travel. It's also impossible to book rooms in many hotels or rent a car unless you have a credit card.
It's a pain.
I think what the "experts" tell you to do is cut up the cards but don't close the accounts, something about closing the accounts is the issue though I don't understand it. Personally I'd think leaving them open would leave you open to fraud.
We're doing much the same thing here: when we bought the house last year we were VERY carefull as to the amount of monthly payment (we got lucky since the economy ment we got a nice low, locked in, interest rate). What we have for disposable income (which isn't much really) goes towards paying off the car payment. We paid off the credit cards with the tax return this spring (it was much higher than planned since we'd bought a house). And what little we buy thats not technically nessecary are generally mild upgrades of nessecary stuff. I buy soaps from my friend, costs more per soap, but I prefer her stuff over most of the store bought stuff, and we buy a higher end coffee, that sorta thing.
Your credit rating will be just fine with only one credit card. We have only ever had one card, pay it off every month (always), and have credit scores in the high 700's and low 800's (depending on agency).