Cash-Strapped Consumers Buying Groceries On Credit Represent A Disturbing Trend

[Purveyor]

Mon, Mar 3, 2008 (2:07 a.m.)

As the economy continues to falter, credit counselors say they are noticing a surge in the number of families who are using credit cards to buy such necessities as groceries.

Moreover, a story by USA Today on Friday says that people who are in financial straits are increasingly more likely to cover car payments and credit card payments before paying their mortgages. As one credit counselor told USA Today, people know their homes are at risk but they say, “I don’t want to let my credit cards go because that’s my cash flow.”

And such a trend typically signals one thing: desperation.

Not surprisingly, credit card debt has risen sharply in areas where the mortgage crisis has hit hardest: Nevada, Arizona, California and Florida, experts say. Residents in these areas “are losing jobs and overtime hours and other income and are trying to supplement their lower incomes with more spending on credit cards,” Mark Zandi, chief economist for Moody’s Economy.com, told USA Today.

Earlier last week, USA Today also reported that Americans were passing up the little luxuries, such as $5 coffee drinks and expensive bottled water, to save money. But these reports seem to contradict others, such as one by The Wall Street Journal on Friday, that said consumer spending is up. However, the Journal reports, consumers are still waiting for sales to purchase such items as clothing, electronics and furniture.

Still, whatever it is people are buying, more of them seem to be doing it with credit cards. And it is only a matter of time, experts say, before consumers max out their cards and start failing to make those payments as well.

---EOE---

http://www.lasvegassun.com/news/2008/mar/03/limit/

[peace13]

1. I wonder how they separate the people who use credit cards

for food and then pay the bill at the end of the month. I always use my Discover card to get the 5% back. I have done this for years. Peace, Kim

[Donnachaidh]

4. how much interest do you pay for the use of that Discover card?

Yes, I'm nosey. :evilgrin:

[peace13]

8. If you pay the balance at the end of the month

there is no interest. The card has no fee. Now, if I don't pay my bill on time I would have a late fee and interest no question.

[knitter4democracy]

5. I wondered that, too.

I use the credit card at the grocery store sometimes, but we pay it off.

[CountAllVotes]

11. What Discover Card is it that you have?

I have one too - it gives 5% back on gasoline purchases and automobile maintenance. I am unaware of a Discover Card that gives 5% cash back on groceries and I have been a customer of their's for over 20+ years. Please advise.

I have another credit card that gives 2% cash back on groceries.

The key to any of these cards is to be certain to pay them off when the statement closes for the month. You have no interest to pay this way (and this way only).

:dem:

[Divernan]

12. I use my Amex card and get frequent flyer miles points- & never carry a balance over

from month to month. I use that card for every possible purchase - gas station, drug store, Loewe's, Barnes & Noble, all restaurant meals, clothing, etc. Gets me about 12,000 points a year. But I could see that if you were strapped for cash and getting paid every two weeks, you could build in a "float" of several hundred dollars a month. I used to do that years ago when finances were tight.

[Yavin4]

21. I Do The Same with My Amex, and They Beg Me To Carry Over My Debt

Every month, they send me a letter begging me to carry over my balance from month to month. In the last three years, I have charged over $21,000 without paying a single dime in interest payments or late fees.

[TheFarseer]

24. they beg you to carry a balance?

Do they ever tell you what's in it for you!

[Yavin4]

25. They Offered Extra Rewards Points...Big Deal!

They spam the hell out of me in order to get me to carry over my balance.

[Gormy Cuss]

16. The context is "credit counselors are saying"

In other words, this isn't a statement about a general credit card user trend but about credit card usage by those who also seek the services of credit counselors. That subset of consumers is more likely to be in trouble with debt and less likely to be just consumers using a credit card as a convenient way to pay.

[TheFarseer]

23. That's what I do too

I put everything I can on Discover Card and eat at Red Lobster every third month. I don't even know what my interest rate is. It doesn't matter.

[SoCalDem]

27. You are probably in the .000037 percentile

You are the CC company's nemesis.. They LOVE the ones who get near max..re-fi the house, pay off the CC, and tack on that CC debt to their homes over 30 years..

Just think.. in year 24, you will still be paying off that pizza from all those years ago...or those $200 Nikes your 40 yr old, wore ...when he was 12..:eyes:

the reality is this... once most people "pay off" the cards with their equity, they just charge
'em back up again..

the fly in the ointment?

re-fis & equity extractions have come to a screeching halt.

It's time to pay the piper..

[Donnachaidh]

2. and once the house is foreclosed on, and the credit cards are maxed out

and the cars repossessed (and repossessions ARE on the rise, even if the MSM isn't reporting it) - these people who are hooked on plastic will have nowhere to go. People need to wake up and see that they are being fleeced into a hole it will take them years to get out of.

Keeping up with the Joneses (that mythical family that PR firms love to foist on stupid consumers) will land some of them in the same highway underpass that many of our returning vets find themselves in now.

[Supersedeas]

3. and when the new bankruptcy laws really begins to bite

[knitter4democracy]

6. What about Michigan?

Not to be nasty or anything, but the mortgage crisis has hit us the hardest by any measure. Hell, we're losing population to the states they mention in the article. That's just great--people move out of Michigan because we're dying, so they move somewhere else that's in trouble? Great.

[Purveyor]

14. Well soon the automakers will have to start hiring to replace all the higher paid workers

that are taking the buyouts with workers willing to work for $9.00 per hour.

I'm guessing that they will have little troubling filling those positions.

BTW, I living near Jackson, MI so we do feel each other 'pain'. We are, I'd imagine, into our 3rd year of this housing/manufacturing depression and there is damn little hope in sight.

[knitter4democracy]

20. I don't think they're planning on replacing them.

That's my gut feeling. Ugh.

Jackson's hurting, too, from what I hear. Hard times all around. :(

[skooooo]

7. DEBTORS PRISON!!

For the lot of them!!! That will teach them to break the law.

:sarcasm:

[peace13]

9. When will Congress be held responsible

for the abortion of a banking bill that was designed to be the nail in the middle class coffin? Gotta wonder.

[DebJ]

10. I have used credit cards for groceries but if paid off in 30 days

there is no interest. However,I recently found out that using a credit card for groceries
lowers your credit rating. I still do it, anyway. I use the card to buy things that are
on sale for 30-50% off, and buy enough for 6 months and sometimes more. Usually within 6 mos
the stuff is on sale again, so I never pay full price for some items like laundry detergent,
toilet paper, meats I can freeze. I don't run out, either, which helps since I am very
pressed for time as a full-time student who works and an adult who runs the household, fixing
all meals, etc. Before each semester begins, I try to buy enough meats, frozen veggies, rice
pastas etc on sale to last 4 months. I pre cook and everything is ready to go during term
papers and exams. All the packaging has been tossed, less trash/recyling and dishes to deal
with. Works for us.

[CountAllVotes]

13. how did you find this out?

>>However,I recently found out that using a credit card for groceries lowers your credit rating.

Why would this be true if you pay the card off and have otherwise good/excellent credit? Does this also apply if you use your credit card to pay the bill at a restaurant?

Do you have a link to back this statement up?

Please advise.

Thank you.

:kick:

[DebJ]

15. hmm, I didn't save any links. I am pretty sure it came from my

credit card company's website. I think the WAMU one, which gives me
free credit reports and tells you ways to improve your rating. Yes,I
am pretty sure that is where I read it.

I am willing to bet restaurant tabs would not do that as this is what
many businesses use credit cards for, and hey, it is just the little
guys they want to screw over. I don't think paying off the card makes
a difference. Of course, the 'ding' you would get for using the card
for groceries is likely not weighted as heavily as payoff, pay on time,
total debt, etc. You get a plus for paying it off in full to counterbalance
the negative of using it for groceries.

[Gormy Cuss]

18. Just a guess here, but I think that if one has low credit lines and charges near the limit

even if the debt is paid in full each month, there may be a downward adjustment in the score because the amount of credit used as a proportion of the amount available is high (for example, if you have a $500 limit and charge $400 worth of goods each month.)

[CountAllVotes]

22. I pay it off every month

I get cash back at the end of every billing cycle. I use this credit card I have to pay for many things, including utilities, phone bill, groceries (2% cash back), gasoline (5%) cash back, and everything else I charge I get 1.25% back.

I just make sure I pay it off every month.

I will contact them and ask them if using a credit card to buy groceries causes me to have a lower credit rating just to check.

I know one thing, my late father would never use a credit card to buy food with.

However, in my case, if I shop on the right day every month, I save 12% on everything I buy at the local health food store.

That can be a nice chunk of $ and it pays for gasoline for a couple of weeks. I make it work for me, not against me.

:)

:dem:

[Rex]

17. I've always said two things will lead to our downfall

mass consumerism and credit cards.

[Selatius]

19. You can't supplement anything with a damn credit card.

You have to pay it back...with interest.

[Indenturedebtor]

26. Yes

But we often find ourselves without a choice. You do what you have to do to eat sometimes.

[Tesha]

28. We've been buying groceries on our credit cards for *YEARS*.

Why wouldn't we?

Mr. Tesha's and my credit cards from our local credit
union charge no fees per year or per transaction.

They're paid in full every month.

And they collect some sort of mysterious points that
occasionally turn into airline tickets for us.

If we didn't use them, we'd have to carry cash or pay
transaction fees with our debit cards. Or write a
cheque and who does *THAT* anymore??? The credit card
is, by far, the easiest way to bring home the bacon.

Tesha

[trof]

29. Us too. We get cash back on Discover.

Comes to a tidy sum at the end of the year.