Collector - May 2017 - 10
THE FACTORS BEHIND
OF LESS THAN $50,000
IS $100,000 OR MORE
Why are Americans charging beyond their means?
motional spending happens when
you buy something you don't need or
want, and as it turns out Americans
love to spend. According to a recent
NerdWallet survey, almost half of U.S.
consumers say emotions have caused them
to spend more than they can reasonably
afford. The study found that only 10 percent
of consumers incur credit card debt because
their incomes won't cover necessities.
So why do Americans overspend?
"Americans get into debt for varied reasons,"
said Sean McQuay, NerdWallet's credit and
banking expert. "Some of us use debt to
make ends meet, while most of us overspend
on stuff we don't need."
Former financial planner Gary Foreman
from CreditCards.com explained a few
reasons behind emotional overspending. The
first is power-the power to make decisions
and back them up makes consumers feel
good. The second is immediate gratification.
Credit cards give consumers the ability to
make purchases on demand and delay the
consequences of payment until later.
The NerdWallet study shows overspending
differs among gender-women are more
likely than men to say stress causes them
to overspend (35 percent vs. 24 percent),
while men are more likely to say excitement
causes them to overspend (26 percent vs. 18
Even income affects overspending rates.
Consumers with a household income of less
than $50,000 are more likely to overspend
due to stress than those whose household
income is $100,000 or more.
What consumer spending trends are
we seeing right now? Consumer credit
delinquency rates are expected to rise
this year. In the third quarter of 2016,
consumers accumulated nearly $22
billion in credit card debt, according to a
WalletHub study. This marked a 34 percent
increase in credit card debt since 2014
and is nearly 60 percent above the postGreat Recession average. By the end of
2016, credit card debt topped $1 trillion,
according to The Nilson Report.
This rise, coupled with the expected
interest rate increase in 2017, led
TransUnion to predict that credit card
delinquency rates will be up this year.
It noted that last year the percentage of
subprime accounts reached its highest level
since the end of 2010.
As long as consumers are letting emotions
dictate their shopping, causing them to
spend beyond their means, the accumulation
of debt will continue to weigh them down.