With the recent recession fading in memory, many consumers are getting ready to buy again — helped along by the holiday spirit. In fact, credit spending is also on the rise, according to a recent report from Experian. With the recession and the financial crisis firmly in the past, and the economy recovering, a number consumers are feeling more comfortable about taking on debt again.
Even though Black Friday shopping revenues were down this year, consumers are getting comfortable with the situation in other ways. First of all, one in 17 consumers opened at least one new bankcard this year, according to Experian. This is an increase from one in 21 consumers last year. This brings the average number of bankcards up to 2.18 — an increase of 4.2 percent.
Now that consumers are getting more bankcards, and it’s likely to change some of the shopping behaviors of many.
Debt is on the Rise Again
Not only are more consumers opening bankcards, but debt is on the rise again. Just after the financial crisis, many consumers paid down their debts, especially their credit cards. However, that’s changing now that confidence has returned. Instead of cutting up their cards, consumers are opening new cards and adding to their debt. The average debt, according to Experian, is up to $28,496 per person, which is an increase of 2.3 percent over last year.
However, even though consumers are in a buying mood, they aren’t quite ready to purchase homes. I found it interesting that, even though consumers are ready to put more on their credit cards, they aren’t ready to commit to a mortgage. Mortgage originations are down by 39 percent this year. This is somewhat surprising, since home prices remain relatively low, and mortgage rates are near historic lows. However, it seems as though a mortgage is a much bigger commitment than putting a few holiday gifts on a credit card. Some expect mortgage activity to pick up — although modestly — next year.
Are You Spending More?
Now is a good time to look at your own spending habits. Are your expenses creeping up, like the credit card use in general among consumers? What is your situation with regard to buying? Take a step back and consider where your money is going in order to avoid getting too wrapped up in the current trend.
While you might feel a little more secure in your financial situation, that doesn’t mean that it’s a good idea to get back into spending habits. Instead, it makes sense to see if you need to cut back a little. If you have started carrying a balance again, make an effort to reduce what you owe. If you’ve reduced your efforts to build an emergency fund, redouble the attempt. After all, if you don’t you could find yourself in trouble. The good economy won’t last forever, and there will be another down cycle at some point. The best way to prepare is to save up ahead of time, and keep debt low. That way, you won’t have as much to worry about during the next economic difficulty.
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