Why Credit Cards Matter So Much

Sharon December 2nd, 2008

Yesterday put the nail in the coffin of a move from recession (small “r”) to Depression (capital “D).  Two pieces of news that were absolutely essential came out – and no, neither one was that we’ve been in a recession since last year, or that last week’s stock market rally was yet another sucker rally.  The first was the observation that McDonalds is now the second-largest merchant vendor on credit cards – that is,  people are now buying their Big Macs on plastic – in part because they don’t have the cash.  Credit card balances have risen enormously in the last few weeks, as people attempt to keep going through the holidays:

Commercial bank exposure via the total amount of credit card loans outstanding has risen more in the last 10 weeks than it did in the previous 10 months cobined. Moreover, the growth in the last 10 weeks — $32.3 billion, or roughly $600 million per shopping day — represents nominal growth of 9.3%, or 48.3% annualized over the last 10 weeks. According to American Express, delinquencies on credit payments rose to 4.1% of all credit outstanding in the third quarter, up from 2.5% in 2007, with Bank of America’s rate rising even more steeply – to 5.9% for the period. Moreover, the pool of loans deemed uncollectable rose to a high 6.7% in the third quarter, soaring from 3.6% last September. What consumer spending there is has been fueled in part by credit card: The second-largest merchant-vendor for credit card use is now McDonalds. This suggests that many consumers are in serious distress if they need to get their $4 Big Mac and fries with a credit card. 
 

 The second is the news that credit card companies are planning to pull 2 trillion dollars of personal and small business credit lines over the coming months, to reduce their risk:

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

“In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent.”

Almost all of the consumer spending we’ve done in the last few days has been done on credit.  In November and December, retailers see more than 40% of their annual sales – and since the average American comes out of the holiday season with more than $800 in credit card debt, it is safe to say that retailers in general are dependent on an annual payback that is then amortized over mos tof the year in the form of personal credit.  That is, the consumer spending economy, 70% of our total economic activity, is utterly dependent on consumer credit.  And whether that’s a good thing or not, the destruction of consumer credit lines will bring about a shift in consumer spending that makes the present economic woes looks petty.

But there’s more to it than that – Americans have seen real wages decline, and have depended heavily on credit, and as unemployment rises and companies cut benefits, pensions and retirement savings disappear, they will depend on their credit more, not less.  The credit card allows them to even out uneven income streams – and millions of Americans have them.  Either they rely on uneven overtime, on tips, on seasonal boom and bust cycles, or as small business owners and contractors whose payment comes in irregularly. 

When unemployment strikes, right or wrong, the expenses go on the credit card.  When hours are cut back or paycuts proposed, the credit card covers the inevitable emergency car repairs or medical bills.  Yes, people should have saved.  Yes, running up credit card debt you aren’t certain you will be able to pay off is dangerous.  But it is also the case that saving has been enormously discouraged, and reliance on credit has become a cultural norm, even a cultural pressure.  Cards poured out like water.  Couples who arrived with a downpayment at a mortgage meeting were told to keep their cash and take out a 100% loan.  Companies made huge sums of money by persuading ordinary people to put their money in the markets and that growth could never end.  Yes, there is personal responsibility here, but the situation was not of each person’s personal making, and there is plenty of blame to go around.

In difficult times, the American policy is to rely on credit as a reserve source, as a substitute for savings.  And that reserve is about to be pulled out from under them.  And for the best reasons – the ability to pay is declining rapidly. Most Americans have no idea how they would pay off their debt in this economy – and my bet is that most of them won’t.  Past recessions have been survived by increasing debt and sitting tight until things got better.  Now, we can’t increase debt, and we can’t sit tight, and it will be a long time before things get better – much longer than most people forsee.  You only have to look at the bank’s own reasoning here – they are withdrawing their credit lines because they don’t believe that a boom will come along and allow people to pay off before they are forced to default.  They know that reducing credit on this scale will hurt them too – but their own internal analyses have convinced them that they are in more danger by loaning than they are by not loaning.  Given the huge role of consumer credit in the economy, that’s one big shift.

What is certain is that without credit, the recession will hit a lot harder, a lot faster than it has.  Personal spending will drop a whole lot more.  People who were getting at least Big Macs will stop having them to eat.  Moreover, with reduced credit lines, people will be forced rapidly to assess their situation – the transition between unemployment and foreclosure, between a bad year and homelessness, between getting by and going hungry, between surviving a medical crisis and being bankrupted by it –  will be much, much shorter.

Yes, building up credit card debt has been bad for us.  But it has also functioned to delay our reckoning, to keep marginal participants in the economy going, to keep the economy going even as far as it has been.  And without large open credit lines, life as we know it will shift.  Suddenly, small businesses won’t be able to buy inventory on credit – and many of those businesses will close.  Travellers whose balances are near their new, dramatically lowered limit will not travel, because they can’t reserve a car, a hotel room or a plane ticket.  People will stop shopping online.  And the kids whose daily meal, tragically enough, was the Big Mac (and we should remember that one out of every three Americans eats daily in a fast food restaurant) won’t eat. 

Sharon

136 Responses to “Why Credit Cards Matter So Much”

  1. MEA says:

    No one deserves to live in a cardboard box.

  2. Thomas says:

    As Dave Ramsey says regarding credit cards: if you play with snakes, you will eventualy get bitten. Get rid of credit cards, debt, and only buy if you have the cash to pay for it. This financial house of cards (franctional reserve bank, fiat money) is going to fail just as they all have in the history of mankind. Why do you think our founding fathers were against central banks and fiat money? They knew the dangers and also saw it first hand here in the original colonies. I would also say keep a good supply of cash onhand as well. There is already talk about declaring “banking holidays” soon. Obama has already asked his supporters to bear with him as he has to take actions that they will not like.

    Thomas

  3. Rosa says:

    Not only does nobody deserve to live in a cardboard box, nobody has the right too, either – police routinely go around rousting out homeless encampments, either for the perceived good of the people living there or for the convenience of richer people. It’s worse in places where the living is better – that is, there’s more police repression in places where it’s warmer and there’s more free food, because those things draw poor and homeless people.

    Up here, it’s 20 degrees. In a month or two it will be -10 for a week or more. Calling the police on someone who has made a livable camp for themselves on a freeway right-of-way or an unused section of a park, or on squatters living in an otherwise-unoccupied house, can kill them. (Sometimes, it gets them necessary services or mental health interventions, but it’s a crapshoot.)

  4. mea says:

    “Autre motif d’orgueuil, que d’ tre citoyen! Cela consiste pour les
    pauvres soutenir et conserver les riches dans leur puissance et
    leur oisivit . Ils y doivent travailler devant la majestueuse galit
    des lois, qui interdit au riche comme au pauvre de coucher sous les
    ponts, de mendier dans les rues et de voler du pain.”

    –Le Lys Rouge, Anatole France, 1894

  5. Elizabeth says:

    (a different Elizabeth from the one above). I have two credit cards that I keep in an envelope at home. I used to carry them with me, but would end up using them as an excuse to buy lunch. Luckily, I never got over my head with them. One is paid off, the other has a small balance that will be paid off within a few months.

    Rosalie, we are in almost the exact same situation. We have property and are getting ready to take on a small mortgage to build our house, also. I take comfort in the fact that, even though taking on a mortgage is risky now, I will feel so much more secure on our little acreage than I do at our house in town. My fruit trees are already doing so well out there! I need to be out there!

  6. Lydia says:

    Jade, Yes the Fed was established in 1913. But the controversy over who would issue the nations currency started long before the Fed came into being. The Federal Reserve Act was just the culmination of what the bankers had been trying to do for a while. Again I say read your history before you discount Lincoln’s murder as having nothing to do with the money system.

  7. LRH says:

    Lydia, is there a book or two you recommend reading?

    A worthwhile credit card: REI, which is a coop. Running all my routine purchases – food, gasoline, etc. – through my REI credit card means that the annual rebate which I can redeem for merchandise is pretty significant. Last year I acquired a good down sleeping bag and a strong battery powered lantern. The year before a tent and before that a portable GPS. My next one will be used to acquire solar battery chargers and an emergency radio, maybe with a hand crank, for when the grid goes down. The electricity in my area (suburban DC) went down several times last summer for hours when the weather was nice (not stormy or hot), for no apparent reason.

  8. John says:

    I grew up in a poor family, and learned from sheer necessity the ability of making do and having to wait for things, long ago…

    Too much credit sets us up for a BIG fall, and its been put off for years..

    One very sad example
    is HELOC

    years ago it was known as “borrowing against your home”, an act of desparation..

    The same factors that “re-educated” thrift and prudence into “credit is same as savings” has set us up.

    Our Grandparents knew better. Let’s at least learn from history!!

  9. Zeke says:

    My youth: Third or fourth hand cars, house was added onto as kids came along with a final of 950 sq ft, garden out back, wood heat, third hand furniture, vacations were a luxury big time, did our own maintenance on whatever, etc. NO DEBT!!!! I saw all this coming three decades ago and have been considered a “doomer” ever since. As my sister says, too depressing. But I read and listen to the panic stricken fifty year old children who haven’t ever known anything other than “I want what I want when I want it”. Or as a man I know says: “I don’t care what I pay for it”. Frankly, I have little, if any, sympathy for those today. Way too much excess. Last summer I was on an Alaskan Ferry talking with a couple from Australia. Their comment: “We cannot believe the excess everywhere”. What I would so much like to hear now is, learn responsibility, learn to manage money, learn to make decisions, learn about life. All I hear is crying and whining about who did what to who and why everyone is an innocent victim of somebody, somewhere. The truth is we’ve become a nation of cheats and liars at every level. Well folks, the school of hard knocks is open. Come on in!! By the way, my house is paid for, two used cars paid for, no debt of any kind, wood stove going right now, savings in Treasuries and a whole lot of peace of mind.

  10. Chrono says:

    What a wonderful world! Soon there will be LESS:

    1. Traffic
    2. Traffic ‘Accidents’
    3. Pollution
    4. Resource Use
    5. Mindless Consumerism

    and there will be MORE:

    1. TIME for personal development
    2. QUIET for meditation (2012 is only four years away)

  11. Ken says:

    Just gotta know, who’s number one if MacDonald’s is number two… or do we just assume it’s gotta be…. WAL-MART!!!

  12. Robert Firth says:

    John at 3:18 – yes, my grandparents also knew better. The best financial advice I ever heard came from my grandmother: pay cash, or go without. A philosophy to live by, and one we are about to rediscover.

  13. Ray says:

    Even though I paid off my cc every month, I was so shocked by the crash that I paid it off completely and shreaded it. Just symbolic, I know, but I have a different feeling now paying everything with cash or debit card. A poster above got me wondering if small merchants pay a fee on debit cards. If so, I will simply pay cash.

  14. homebrewlibrarian says:

    Ray, yes, merchants who accept debit cards get dinged. There’s a break point between debit and credit where they get dinged less by credit than debit but dinged they get either way.

    For that reason, I’ve been learning how to plan my purchases in advance and to make sure I have suitable cash with me. Weaning myself off debit card use has been difficult but I’m getting better at having available cash. I rarely write checks and barely use my credit card to begin with. I haven’t quite gotten to the point of cashing my paychecks when I get them but I figure I’m heading in that direction.

    Kerri in AK

  15. GenghisKen says:

    I learned of PeakOil which led me to economics which lead to politics which leads to getting your act together.I appreciate you efforts Sharon but am unsure wether you or I or anyone can really make a difference at this point in time.I hope you can and will continue reading your blog always.The world is so different now(nothing is honest)the recovery from this time will take a generation at a time that we have to rely on the said generation to pay (college,school,their elders). From what I have seen of the younger generation..I do NOT see it happening. I enjoy all your writing I hope you never stop”)

  16. aha says:

    this is a joke. men no longer provide for the home, which some say makes men lower then infidels, and women work outside the home, so banks and retailers and renters and homeowners charge these dumb pimped out women couples twice as much the rate and the dinks, double income no kids, work twice as hard for nothing and since the dumb women do not cook they esad, eat shyte and die. now thier credit cards will be yanked. what fools and what predators that prey on these fools, usa needs cradle to grave socialism to care for all its dummies, dumb stupid children in big gross adult bodies.

  17. Rob O'Loughlin says:

    The whole economy and money system is a fraud run by Criminal scum gangsters who use the Police as mob enforcers and hide behind a tatally ludicrous, so called, Law system. It’s all a joke. Banks create money out of thin air. Let’s pay them back with thin air. Scum. Pay these criminals NOTHING. They need hanging.

  18. Pangolin says:

    I’m going to go out on a limb and suggest that everyone consider one last credit card purchase. Get yourself a good, sturdy bicycle capable of carrying several bags of groceries. If you are elderly or in some way health impaired consider getting an electric bike to help you along the way.

    For those of you who have families with children or are larger than two consider purchasing a trailer or a specially made “cargo bike.” Should you really get up against the wall a good bike has an expense of about $50/monthly including purchase while a car will cost you about $150/mo. sitting insured in your driveway and never driven.

    I can strap a case of apples and a fifty lb. sack of rice on my Xtracycle modified cruiser. Or two small kids or one large one. The ability to get food, water or wood home without using gasoline could become a survival issue.

    It’s not just about gasoline either. Last winter during a four-day power outage the gas stations couldn’t pump gas without electricity. The one station in town with power was quickly pumped dry by people from outlying areas buying generator fuel.

    Having been recently in the position of having to sell a truck to pay rent I can tell you for a fact that the market value of your car or truck is less than you think if you can’t arrange loans like the dealer can. That valued tool can become a steel albatross awfully fast. Meanwhile in a pinch a $2K bike under you in a survival situation is worth far more to you than a $2k debt is to the credit card company. A good bike will get you where the bus service won’t and bad bikes fall apart when you most need thm.

    Check it out yourself. Search terms are: cargo bike, longtail bike, xtracycle and bakfiets.

  19. ketayun says:

    My grandparents only spent what they could actually pay for and they ended up leaving a good legacy for my parents. Maybe it is time we reverted to the old ways of reusing, recycling, prudent spending and valuing the things we had. Bottom line, If you dont have the cash, dont buy non essentials and in that is a big car, a large house, too many clothes, too much to eat.

  20. artie says:

    I am glad this credit crisis is happening. people need to wake up . we are wayyyyy too spoiled and selfish and full of crap. many of us thing who the hell we are and have this holier then thou attitude as if we are deserving of everything. these are the same type of people that have lived their lives spending on money they dont have and now they will be the first to suffer. they wont get to use their credit cards to get the natural high it gives them , thy wont be able to pay any more utility bills to cover their butts , no more vacations ………they will loose their homes because they wont be able to use their house as a bank as well . . .so all these credit hores are screwed in every way and they deserve everything they have coming to them . i have read in different articles that women who own homes and are single , ( whether by choice or divorce ) are becoming house prostitutes . they are selling themselves in their own home just to make the payments they need to survive. its wild to think what women will do when they have their backs against the wall ….and for the men who are struggling , they will look to steal , scam in any way they can …. so why dont we talk about the after effects of when people begin to loose everything ? lets talk about how far a person will go when they see no light at the end of the tunnel ? these are topics worth talking about ! because they are real and right in front of us , yet no one talks about the horrors that are ahead of many families and children ………..

  21. Rebecca says:

    Re the credit card thing and small merchants: It costs about 5k for the machine, then you pay a monthly fee to some of the companies and a percentage of each purchase. That’s why so many so small companies don’t take them.

  22. ronald macdonald says:

    Looks like it’s time for the junkies to kick their bad habit. Painfull as it may be; in the long run this will be blessing.

    Credit Cards are demonic.

    ps – why anyone eats that crap at MacDonalds is beyound sound thinking anayway.

  23. Jason says:

    My ONLY debt is a house payment. I yanked all of my money out of stocks back in 2002 and got a fed gov job (read job security). All of my retirement is in fed gov bonds, FDIC accounts, gold and silver coins and ammo. I’m set. Bring the D-word on. I’ve got the food and water stocks as well and my family is consolidating their assets. We also know how to plant a garden. When “they” turn on the meat grinder we will be ready for it.

    Jason

  24. peter says:

    Sharon, You’ve written one of the most insightful posts I’ve seen on the financial mess.
    Beginning in January, 2009 is ground zero for financial destruction for many in America. No one will escape. The interconnectedness of the world’s economic systems will now come down to the macro level. Currency collapse seems possible and even cultural collapse. I live in an affluent area. People here seem to feel that as long as they have money coming in from their investments or pensions or what ever and don’t have debt they are okay with what’s coming. There is still an air of, ” I’ve done the right thing so I will be okay.” -This seems to me to be somewhat of a disconnect given what has happened worldwide in even the strongest and most self-sufficient economies.-”If I can hold out long enough, I’ll be okay.” For those that are still strong, it seems just a matter of time. The question is; how long a time?

  25. In need of advice says:

    Thank you for the great article. I wonder if anyone can give me some advice on a really tough situation I am in?

    I own a small business (Luxury business , facials, massage etc.) the first things to eliminate in times like these. I have nearly $80k in cc debt for the business. I pay as much as I can every month trying to get them paid off for the last three years now. Never late or over my limit once. 780 fico. Business was going along well for the past 3 yrs. and as of this past Sept. business has nearly vanished. The other day I went to the mail collected one of my credit card statements and my minimum payment had tripled. I nearly had a heart attack. I then noticed that my 11.34% rate for the past 3 yrs had risen to 35%. I was barely getting by before but now, I am sitting here knowing I will not be able to pay these bills anyone. I have worked so hard at my business and now I feel I am a victim of our sick government and their horrible mismanagement. Can I get a few opinions on what you would do in my situation. I feel my options are to BK the business (I’m Sole Proprioter and scared my personal finances will be affected) or should I just stop paying and walk away? Both are terrible options but I just don’t know what to do. I appreciate any feed back. Thank you!

  26. Guy Fox (Tampa Bay/Key West/Havana) says:

    Bad enough the Amerikans are stuffing their maws with faster poo food at McFondles Clown Burgers, but using their credit cards there demonstrates how truly $ick Amerika has become. Too many consumers in corp-rat fascist Amerika; not enough citizens. And this explains how George W. Bush, a dry drunk $ociopath, was $ellected (and then re-$ellected) to become the warmongering cowboy president of a bankrupt and dying empire. Indeed! WHERE THERE IS NO INSIGHT, THE PEOPLE PERISH! And so… the Amerikan people shall now endure the collective karma that they have engendered. Enjoy!

  27. Steven says:

    I don’t know how much credit I can give to an author who fail to see that McDonald’s is the second biggest merchant vendor for credit cards uses not because people are they are using consumer debt to buy their Big Macs, but instead are using their bank’s debt cards as credit cards. In fact, if the author ever went to a McDonald, they would quickly realize that McDonald’s only use plastic as credit, and never as debt.

    I also think a lot of older people fail to see is that most people in my generation (25-35 year olds) are learning the scam debt really is. Over the last ten years, I’ve noticed a general reduction of people wanting to go in debt to buy things. People in my age group seam to be waiting to live more in their wage, save more, and spend less on stuff then the people before us. I think one reason could be that once all the 35-45 year olds bought their homes, my age group couldn’t buy homes without crazy loans which lead to this whole mess.

    The world is slowly moving away from debt and that move will be a painful one as we have relied on it to be the foundation of our economy for the last 30 years. I sure that one outcome of this depression will be 50 years of reduce credit usage until a generation forgets the lessons my generation is learning about debt.

    Survival is based on how you use debt. If you depend on it, you will die. If you don’t have it, you will decline. If you it as a tool, you will prosper.

  28. Jean says:

    To: In need of advice: DO NOT walk away from your debt, they WILL come after you. Call them and try to negotiate lower payments & interest; cancel the card if you can. I had a very high Visa bill from Citibank, after missing one payment due to emergency surgery last year the mim payment skyrocketed into the entire balance. I could never catch up. I went to RESQDEBT and they got me a smaller mim payment and no more interest, I’ll be paid off in 3 yrs. This deb negotiation co even waived the balance of their fee for me. It’s still tough will other bills and all but this group is great. Ask for Brandon at 800-319-1619 and tell them Jean Bush sent you. You can contact me at [email protected] if you want to talk further.

  29. Fred says:

    I have never had a mortgage or any debt in my life and the reason why is this: I waited until I was 30 before getting married. By that time I had saved enough to buy a house outright.
    And don’t even think of having children unless you are debt free. To burden children with poverty is a form of abuse.
    I now regard debtors in somewhat the same vein as drug addicts, smokers, drinkers, porn addicts. Weak and stupid!

  30. Jean says:

    Fred, you are an insensitive idiot; a good majority of people are in debt because of a sudden life changing event: medical, divorce or job loss. The more you scorn the “new poor” the greater the karmic chance of something happeing to you. Good luck with your snotty little life.

  31. Rosa says:

    in need of advice, you need a lawyer’s advice. There may be a free or sliding scale legal clinic where you live that can help you.

    It depends if the credit card is yours or the businesses, and what your credit agreement is, and how you incorporated, and a bunch of other stuff.

    I will give you some emotional advice though: if you have to let the business go bankrupt to save your personal assets, try not to let it make you feel bad about yourself. Protecting investors from debt is what the concept of incorporation is for.

  32. yuberrebuy says:

    Gov. wants credit card issuers to cut back on credit by giving said banks cash and cash promises to weather any eventualities that may befall them. Not to unfreeze credit markets. I know this because I sat in on the private hearings.

  33. In need of advice says:

    Thanks for the advice Rosa and Jean. The unfortunate thing is I never put the business in an LLC so I’m afraid they can come after my house and retirement??

    Businesses in my shopping center are dropping like flies. I don’t know what the credit cards companies are going to do with all this defaulted debt?

    I truly believe Peter Schiff and Gerald Celente know what they are talking about and what we are about to see in the very near future and if that’s the case we will all be standing in food lines and trying to stay alive. These are very distressing times.

    Good luck to everyone!

  34. Ann says:

    Jade, in Lincoln’s time and after there were a number of attempts made by the Federal Reserve private banker cartel to foist fractional reserve banking a/k/a a central bank, on the American people. 1913 just happened to be the year they finally succeeded. Do you also know that 60% of your property taxes and income taxes go to the Queen of Eng.?

    Those of you who have faith in Christ/God, start incorporating fasting into your regular daily routine. Try cutting out, say, one meal per day. Not only will you save money on food, you will likely at least stabilize your weight too. Surprising how little food we actually need. Pray to God more as you do this.

    Matter of fact, back a few months ago I asked the good Lord to be my office manager. Ever since I did that, work assignments have come in regularly and my money comes in too. My calender is always arranged so that work does not pile up and get out of control and if something cancels, something else calls in. I am self-employed, so my paychecks vary according to my outstanding invoices. I’ve never wanted for money really, but as things get tighter and tighter cash wise around the globe, I know it’s only a matter of time before even attorneys begin having a tough time meeting their bills. Many big law firms have let go of many many lawyers and entire clerical and legal staff because their big bank clients, real estate, construction, business clients have fallen on hard and harder times. Now begin the lawsuits between these behemoth banks, Wall Streeters, brokerage houses, and other financial institutions. Long as they sue each other, I’ll be working. My Office Manager is seeing to that for me.

    I have no credit cards – hate ‘em. Some things I do in cash, some things with debit, so there’s never some balance hanging over my head. Mortgage is almost paid off, so I got a lot of equity. Now to find a good Christian hubby and head for the hills.

  35. Alex_C says:

    Sharon has done an excellent job of describing how I ran my small business, using CCs in place of savings.

    Now my business is gone, I’m unemployable due to a trashed credit rating, the IRS has a lien on everything I have and everything I will have, and I ask for spare change for a living.

    I am laboriously saving up, CASH, for a banjo so I can make the move up from street beggar to street musician – I expect a lot more beggars to enter the street scene soon, and I think I have a knack for music.

    We are truly entering the Greater Depression.

  36. Isis says:

    Fred,

    That comment was really uncalled for. I mean, yes, some people got into debt because they were stupid as hell; but then, some people get cancer/stroke/diabetes, or get into an accident, through sheer stupidity, but hardly means that everyone afflicted with one of these should be considered an inferior human being. Geez.

  37. Dave says:

    Yes the D word is the proper one to use now.
    Depression is here ,I believe we will see a major war perhaps even ww3 .Because that would be the way to get people off of talking about the economy and would also be a way to escape the worst effects of a Depression.
    Americans should be in the streets with guns.
    they just signed away 10 trillion of tax payer money
    to fix banks not worth an aggregate of 3 trillion.
    so where is the other 7 trillion going go?
    no answers no oversight and corruption left and right.

  38. [...] Sharon Astyk: “Yesterday put the nail in the coffin of a move from recession (small “r”) to Depression (capital “D). Two pieces of news that were absolutely essential came out – and no, neither one was that we’ve been in a recession since last year, or that last week’s stock market rally was yet another sucker rally. The first was the observation that McDonalds is now the second-largest merchant vendor on credit cards – that is, people are now buying their Big Macs on plastic – in part because they don’t have the cash. Credit card balances have risen enormously in the last few weeks, as people attempt to keep going through the holidays.  [. . .]  The second is the news that credit card companies are planning to pull 2 trillion dollars of personal and small business credit lines over the coming months, to reduce their risk.” [...]

  39. Fred says:

    Nobody in a sane country should have to go into debt because of illness. I have always lived in UK and Canada where national health systems have been in place my entire life.

    Americans have stupidly spent their wealth on wars and as such should all be classified as terrorists. Bring on the karma!

  40. Isis says:

    “Nobody in a sane country should have to go into debt because of illness.”

    Well, great. So what’s a person to do if s/he lives in an ‘insane’ country?

    Look, I have no debt either, not a penny. And while this is partially due to the fact that I made some smart choices, in other ways, it was simply a matter of good luck. I mean, yes, people who are drowning in debt because they couldn’t tell the difference between oatmeal and electronics, or between rent and exotic vacations, and instead considered all of the above to be ‘necessities’, are idiots. But so many others got there through sheer bad luck, and as the saying goes, there but for the grace of God go I.

  41. BW says:

    This report does not just point out the economic woes of the American citizen, and how they will not be able to fall back on their credit cards to get them through it as in the past.

    It more importantly, points out the fact that Americans are Totally Brainwashed for the up and coming Cashless Society.

    For people to buy their Big Mac’s with a credit card, this truly gives all a witness showing the effects of the brainwashing power of the elite.

    Visa’s goal is 2012. The commercials demonizing cash and check users are working perfectly.

    They even have a Cashless Monopoly Game out now that brainwashed parents will rush out and get their children during the holiday.

    Not realizing that it is to prepare their children for the Cashless Society.

    Yes, and to also dumb down their children by having the computer do all of their adding and subtracting for them.

    Anyone who wants to know where this is leading only needs to read Revelation 13 v 17 in their Bible to see that No One will be able to BUY or SELL.

    Unless you bow to the government/beast who has been showing his great appetite lately by taking over all of these banks, mortgages, policies etc.

    The powers at be can only control citizens in such a way, if all transactions Go Through the Computers, like at McDonalds.

    They control the satellites that control the computers.

    Just how long until its a chip in your head or hand?

    Wake up people, wake up.

  42. In need of advice says:

    BW, you hit the nail on the head!! That’s why I am asking, knowing what is coming what should I do???

  43. hank paul... says:

    NO CREDIT cards.
    debit cards. cash, only

  44. [...] Everybody should read this article. Sharon Astyk has done a fine job. Almost all of the consumer spending we’ve done in the last few days has been done on credit.  In November and December, retailers see more than 40% of their annual sales – and since the average American comes out of the holiday season with more than $800 in credit card debt, it is safe to say that retailers in general are dependent on an annual payback that is then amortized over mos tof the year in the form of personal credit.  That is, the consumer spending economy, 70% of our total economic activity, is utterly dependent on consumer credit.  And whether that’s a good thing or not, the destruction of consumer credit lines will bring about a shift in consumer spending that makes the present economic woes looks petty. [...]

  45. Cat Callahan says:

    God! I am scared to death! We owe about $5,000 in debt and are still paying on a house that we are buying from a predatory creditor! Our contract said it was a $65,000 house and we have paid over $120,000 and they won’t close until we have paid $200,000! My husband is ill and we are just ataying alive! Pray for [email protected]

  46. brain says:

    spot-on analysis. card companies are slashing credit lines as we speak. jp morgan unexpectedly closed 3 cards i had – those 3 cards had exactly $0.00 in total balances vs. $18,000 in potential credit; & i have an excellent credit rating! this is happening to a lot of people i know. my business is doomed, soon to join my doomed credit. maybe not such a bad thing after all.

  47. brain says:

    To: “In need of advice…”

    Call and work out a plan with your “secured” debts. For the unsecured credit cards – blow them off, for now or forever; unless you lied excessively about your income on credit applications. Unsecured debt is just that to the issuing company – unsecured. It was a risk for them; all they can do is call & hound you. And you can request that they stop calling you, or just change your phone number.

  48. SickandTired says:

    Come Jan 1 I will be debt free. That’s right! I’m engineering a personal bailout. I will not pay any of my credit accounts after this month. Nope, don’t have to, don’t want to and ain’t going to!. I don’t care about a credit score. If I don’t have cash, I don’t buy anymore. The banksters have been robbing all of us for a hundred years thru usery laws, fiat money, the FED (which is private), the IMF and the IRS. This is my revolution. I’m not paying anymore interest and will do my best to avoid as many of the dozens of taxes out there. I refuse to be a slave for the Illuminati, NWO, banksters, puppets and politicians. I am not fodder to be slaughtered slowly.

  49. Jean says:

    To Brain & sickandtired: What do you plan to do when they take you to court and garnish your wages?????? They can do it.

  50. [...] why credit cards may be important. But… no wonder the savings rate has been a negative percent! Published [...]

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