Sure enough, moments ago the Fed reported household consumer credit for the month of November and it is there we learned that not only did overall consumer credit miss expectations for the 4th month in a row…but that in November revolving credit, aka credit cards, not only declined for the first month since August, but it had its biggest collapse since November of 2013, which not only explains why this year’s Thanksgiving spending season was a complete disaster but also shows that contrary to the S&P hitting record highs at roughly this time, the bulk of America is still actively deleveraging.
Now, the country’s total credit card debt is often viewed as a sign of consumers’ expectations about the economy. If they expect things to get worse, they start tightening their belts and charging less on credit cards. That appears to be what’s going on here. Despite lower gas prices and a rising stock market, people on don’t feel like their personal economic situations have gotten much better.
On an individual level, however, this is much better news. It is unequivocally good that individual Americans are reducing their credit card debt. Remember my axiom about credit card use: using a credit card is good if and only if you use it to buy stuff you would buy anyway, for the sake of convenience and collecting rewards. If you’re using them as a form of financing (i. e., paying later to get something now), credit cards suck.
As a result of shedding so much credit card debt, Americans will be in a better position to actually save and invest–which will make them wealthier and more prosperous in the long run.