Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=210121
Story Retrieval Date: 5/25/2013 7:05:16 AM CST
Many Chicago spenders are still wary about buying on credit.
Some in Chicago put away the plastic
“Cash is king” according to Chicago consumer Jesse Gomez, but U.S. shoppers appear to disagree. According to a government report issued Wednesday, consumer credit outstanding rose at a 5 percent annual rate in September to $2.737 trillion from $2.725 trillion in the previous month.
But September's credit card debt was down 4.1 percent from August despite indications that the economy is headed for improvement.
An unofficial survey of credit card holders in Chicago’s Loop showed that many consumers are still wary of debt and are trying to keep card usage to a minimum. “I don’t want to pay interest on daily expenses, and I’m worried about racking up a balance,” said Gomez. He said he used mostly cash to pay for purchases during the recession and will continue to do so in the future.
But according to the Federal Reserve Board’s September credit report, the nation’s pile of outstanding credit is still increasing. Consumer credit increased at a seasonally adjusted annual rate of 4 percent from July through September. The change was positive despite declining credit card debt because of September's 9.2 percent increase in non-revolving credit, which includes auto and student loans.
The report comes in the wake of new student loan repayment options issued by the Department of Education. The most recent “Pay As You Earn” plan is hoping to give many federal loan borrowers a payment-driven option after graduation. Payments will be adjusted according to a graduate’s income. The Fed data supports the idea that students will be more willing to take on debt with flexible payment options.
Overall, U.S. consumer credit has been on the upswing in the last few years after hitting a low in September 2009. In that month, credit dropped more than $21 billion from a month earlier.
But borrowing more doesn’t necessarily reflect more confidence in the future.
Credit card holder Peter Putnam says changes in the economy haven’t affected his card use: “I choose not to use credit because….what you’re actually earning and what you’re keeping – there’s a great divide.” He has used his credit cards sparingly for years, charging only a few big purchases annually. “Use it in case you need it, but there’s no need to pay interest rates on top of everything else,” he said.
Clarence Stensby, a Chicagoan looking forward to retirement soon, takes the alternate approach. “I use it frequently for everyday purchases, but I keep it under control.” He doesn’t necessarily feel more confident and he has concerns for the future of his finances. “I will be on a fixed income at some point and inflation is going to hit us.”
But credit card holder Alicia Cruz is feeling pretty good about the state of her debt. “I feel confident enough. I don’t use it very often but I don’t have an issue using it for big purchases.” Cruz said that signs of an economic upturn aren’t enough for her to start pulling out the plastic for everyday purchases quite yet.