Consumers Max Out Their Credit Cards In Month When Personal Savings Tumble

Tyler Durden's picture

One week ago we remarked that in the month of December, in order to fund their purchases of Holiday gifts and year-end trinkets, Americans burned through a whopping $46 billion in personal savings, in the process taking the US saving rate down to a one year low of 3.9% and dropping.


Today, we got the credit side of the ledger with the December consumer credit report, in which we learned that in addition to the now traditional draw of Car and Student loans, which came out to $13.8 billion, or exactly in line with the 12 month average draw, sending the total notional to a record $2.24 trillion, it was revolving credit, i.e., credit cards, which saw a substantial $5 billion increase in outstandings - the most since May 2013 - bringing total revolving credit to $862 billion if still far below the nearly $1.1 trillion in student loans outstanding.

So just as the US consumer was tapped out, and saw their personal income remain unchanged from November and real disposable income cratered, as a result having to draw down on their savings, the remainder of all purchases was funded through the use of credit cards, which may or may not be repaid in 2014. There is always hope that this time will be different and incomes finally pick up.

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Say What Again's picture

Again I say. This explains the 2 day mega-ramp in ES

max2205's picture

By the time I read this TWTR went up 2%....thanks....a lot

Boris Alatovkrap's picture

Maybe is correlation of Russian mafia purchase "missing" laptop from disgruntle Target employee.

NoDebt's picture

Same comment I had the last time this story came up:  I can't believe the savings rate isn't negative already.

TruthInSunshine's picture

It is if one uses an actually sound computational methodology for computing it, rather than GIGO goalseeking methodology actually used.

And as I look into the fun house mirrors and see the reflection that is today's risk asset and "market" action, it's so nice to see real markets with the massive ramping of all those risk assets on such great job numbers, Carl iCon tweeting love letters to Tim Cook about plenty of AAPL cash for buybacks left, and commodities spiking/cost of living spiking.

Ya' gotta' hand it to the Federal Reserve lackeys & their Wall Street Masters; these people know how to keep the Ponzi rolling like A BOSS.

Smegley Wanxalot's picture

Probably 20% of the nation saves at an average rate of 33%.  The other 80% if the nations borrows at an average rate of 3.5%.  (.20*.33) + (.80*.035) = the average savings rate of just under 4%.

The 1 in 5 trying to be responsible are what makes that number positive, whereas 4 in 5 of our fellow americans are fucking themselves.

tenpanhandle's picture

I have always wondered how eating a hamburger today but paying for it on tuesday equated to a raise in GDP today as opposed to on tuesday.

Agent P's picture

"I would gladly pay you (17%) Tuesday for a hamburger today."

Tuesday's when the finance charges hit GDP. 

Smegley Wanxalot's picture

I will gladly pay you with money printed from thin air Tuesday for a hamburger today.

Fish Gone Bad's picture

Spending money on things that aren't worth it, and are not needed by people who don't have it to spend.  This has all the trappings of a cartoon.

vxpatel's picture

or, the traits of the leading consumer economy in the world.

Skateboarder's picture

We got an Old Navy credit card offer brochure thing in the mail. In the month of February, spend your Old Navy credit card outside of Old Navy brands and earn three times the rewards points.

$1 = 3 points, and every 500 points gets you $5 in store credit = $166.67 of expenditure for $5 'rewards.' A pair of pants costs 30 bucks plus tax - let's say $35. By spending a mere $1,166.67, you can get a 'free' pair of pants!

Agent P's picture

Are they cargo pants?  Perhaps the spend-per-pocket analysis would be more enticing?

TruthInSunshine's picture

There are millions of financial retards in America who will spend 3 hours of their time and $30 in gasoline to get a $20 gift certificate for gasoline for test driving a new POS automobile they neither want to buy or could afford to buy.

tenpanhandle's picture

After they skin the pants off of you they give you a free pair.  Well, it's only right.

Skateboarder's picture

You won't come back next time if you don't get the 'free' pants at the end of this round. ;)

@Agent P: If we're talking about maximizing 'rewards,' it only makes sense to get the biggest size pants they have. If you don't fit in it... well, maybe you should eat a few dozen McHorseburgers.

@TIS: Great summary of the insanity. The name of the game is 'getting a deal.' Doesn't matter if you expending more time/energy/money than you will ever get out. The 'consumer' lives for the deal.

Wait What's picture

i now feel kinda proud that I don't get credit card offers. they know i'm not their target audience. bullion, cash, or barter, bitchez!

riot-police's picture

What I don't get is. Do lenders not want to get paid? It is becomming paifully obvious that someone is not going to get paid back.

Rainman's picture

Paging Mr. Mozillo ... Mr. Angelo Mozillo

seek's picture

I don't recall the exact mechanics, but I know back in 2008 it came out that BofA was given credit cards to people they knew were incapable of paying the debt back, because they were able to do some accounting tricks with writedowns and sale of the debt -- it was a complicated multi-step operating, but it was net positive to BofA, so they did it. I read about it here so there might be something in the ancient archives covering this.

Wait What's picture

"It is becomming paifully obvious that someone is not going to get paid back."

when it's the government doing the vast majority of the lending, why should they care? it's not their money anyway. they're gonna lend it til it has to get monetized. then expect the Fed to step in and buy student loan securities hand over fist. 'problem solved'

eric89074's picture

If you like your credit card you can keep your credit card.

Pinefox's picture

Lenders don't care if they get paid back because they have the government (we the people) to bail them out.  Look at allthe commercial real estate under construction, demaind pulled forward because of cheap money.  So what if the buildings don't fill up and the debt service is not paid, the Fed and Uncle Sam will protect the banks.  It used to be that in order to finance an office building, 20% pre-leasing was required, no more.  The glut of apartments and office buildings is getting extreme, but the develpers don't care, they can take out their fees, give the buildings back to the banks, and sail off into the sunset on their yachts.  How long they can keep this going is the questions--so far do good, until . . . . . .

Groundhog Day's picture

"just because you borrow a bunch of money, doesn't mean you have to pay it back"

Obama to the rescue

TruthInSunshine's picture

Some may not believe this, while others may have similar experiences to relay, but I know someone who ran up in excess of 400k on many credit cards, including one particularly well-worn American Express Black Card, and without declaring bankruptcy, ended up settling with those "unsecured creditors" for less than 15 cents on the dollar in 2010.

His credit was trashed, but he had a ton of cash, and hasn't needed to charge anything since - ALTHOUGH HE HAS BEEN FOR THE LAST 3 YEARS.

Groundhog Day's picture


We ZH'ers are morons chasing after gold.  I know a business owner who took all the unsecured credit lines the banks were handing out like candy under his ss# (he was 62 at the time) during 2005-2007.  He took something to the tune of 800-900k transfered all his business interest's to his kids and wife and simply stopped paying them back.  He to settled for 20-25 cents on the dollar

TheRideNeverEnds's picture

Can I margin my credit card debts against my long e-minis to buy more nasdaq?



Duc888's picture
 what's the problem?


Just be like FEDGOV and increase the debt limit.

nink's picture

We just need a new form of collateral in order to get more credit.   NEWS FLASH NASA FINDS RARE METAL ON MARS THAT PRODUCES INFINITE ENERGY .   As the USA is the first land on mars we have taken ownership and will now be selling stocks in our new INFINITE ENERGY planet producing metal. 


I can see the shares hit the market in the morning. 



JMT's picture

I have to ask this question -- what if one is incorrectly diagnosed with depression but in reality has  Bipolar disorder and is given medication to treat the depression but then goes wild with credit cards once they start taking the medication (such as Prozac..I was given this medication over two years ago and the dose was quickly raised to near max four or five capsules a day along with ADHD medication -- my debt went parabolic.  I was making good money but in November everything came to an abrupt halt,  I was without income since then and eating the orange ADHD tabs like candy.. so much money going out the door for rent and to pay debt credit score now barely reaches 600....  

Australian Economist's picture

My savings rate is 36%


How am I doing?

MagicMoney's picture

Well according to Scott Lansing a real estate/ property investor, your debt to income shouldn't exceed more than 36%.

ClassicalLib17's picture

I drive a 14 year old truck, my house is long paid off,  I drink two 750ml bottles of Makers Mark a week,  pack a day smoker,  and I saved 40% of my net pay the last 6 years of my career.  Getting ready to file for my defined benefit pension and plan on putting away 60% of that until I can't.  Just a few stray thoughts from a knuckleheaded tradesman with a high school education.  Life is good for now. 

Rainman's picture

Sounds good .. 'cept you don't seem to be drinking enough.

q99x2's picture

Not to worry. Obama is going to give everyone in America $35,000 credit at the new Postal Office Banks that the DHS are rolling out.

MagicMoney's picture

Savings tumble = economic growth!!!!!! YAY!!!

AMGdesignnl's picture

My kids bought me a good bottle of wine for Christmas ... we had lots of fun ... no plastic money involved <);o) 


GCT's picture

Spend it I tell ya!  Spend it!  The gov is just going to come in and take it sooner or later so you might as well enjoy the fiat while you still can.  Buy all the tangible assets you can and stash the rest.  Better then having the gov come in and tell you  that you are too stupid to hnadle that cool million you wisely invested all these years. 

Spread the wealth and buy some hookers and blow.  Use some fiat to light those expensive cigars.  Sheesh it is time to have one hell of a party.