Credit card use by poor Americans rises as their savings run out – News Couple
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Credit card use by poor Americans rises as their savings run out


Last week we explained why the widespread myth that there was nearly $2 trillion in “excess cash” savings equally distributed across the US population thanks to Biden’s trillions was nothing more than a pipe dream: as we explained then when looking at cash holdings (deposits verifiable and currency) from 1Q20-1Q21 across income distribution, 65% of excess cash (cash accumulated above the level of the fourth quarter of 2019) is kept within the top 20%, While only 35% were distributed to the entire bottom 80% (the top 80% hold ~$1.4 trillion in excess savings and the bottom 80% hold ~$800 billion).

And given the recent frenetic pace of consumer spending among the bottom 80%, we’ve also said that much if not all of that cash savings has been spent.

Overnight, Bank of America indirectly confirmed this.

When looking at the latest auto debt and credit spending data, Michelle Meyer, chief economist at Bank of America, notes thatOutstanding credit cards among the lower-income group have risen at a 23% growth rate over two years, up from the summer average of 15%.

And obviously, as consumers ramp up their fees, that means their bank accounts (where those legendary surplus savings can be found) This rise in credit card spending has come at the expense of debit card spending growth that has slowed significantly over the past several weeks.

According to Bank of America, this reflects the increasing reliance on credit cards “Loss of income support from expiration of unemployment benefits (UI) that disproportionately affected low-income residents.” In fact, UI recipients in the low-income group cut spending significantly, with the two-year growth rate dropping to 11% from 31% before expiring in early September.

And while it may not be directly related to consumers running out of savings, BofA also highlights another intriguing note, which we touched on last week: As the chart below shows, There was a growing gap between spending trends across the country. Among the strongest Florida where total card spends increased about 25% over a two-year period. This contrasts with CA and NY, for example, with 20% and 18% growth, respectively, over a two-year period for total card spend.

Bank of America sees a huge gap between New York and Florida when it comes to spending on entertainment services or restaurants/bars. For example, New York spending on restaurants and bars rose 14% over a two-year period and fell 8% on entertainment. But in Florida, the jump is 24% and 25% growth over two years, respectively, for restaurants/bars and entertainment services.

The gap began with the Labor Day holiday in line with the peak in COVID cases nationwide. This is the direct result of having some of the lowest restrictions due to the spread of the Corona virus among all states in Florida, which has not only led to the state seeing a significant decrease in cases of the virus as natural immunity rises…

…but also to boost the local economy, while at the same time paranoid New York snowflakes refuse to come out of the mortal terror that the Chinese virus cannot wait to penetrate the layers of their three masks and kill them all.





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