Living with credit

It’s the end of the world, or maybe just pizza

Daniel Ray

Government data and anecdotal data confirm: We’re using credit cards more for everyday needs.  This could be a sign of economic Armageddon, or it could just be take-out food.

I’ll explain.

As our Jeremy Simon reported yesterday, the Federal Reserve’s monthly G19 report on consumer credit showed that credit card spending had surged. The Fed’s revolving debt category, which is 98 percent comprised of credit card debt, rose to an annualized rate of 7.9 percent.

The Fed’s data are backed up by a new release from Discover Financial Services, which conducts a monthly survey called the Spending Monitor Index. This month’s index, also released May 7, shows spending is up overall, and the survey asserts that it’s because people are spending a lot more on necessities. They’re reining in spending on discretionary items, and expect to continue to do so.

“Hardest hit by the slump in economic growth have been people with incomes under $40,000. They are much less optimistic about the economy and their personal finances than higher income groups, and they are feeling the effects of increased prices more dramatically,” the Discover survey said. “The highest percentage of people who are spending more on necessities and less on discretionary items are people who make less than $40,000.”

The Discover survey does not measure whether that increased spending comes from savings, from current income — or from borrowing on credit cards.

Some people clearly are reaching for their credit cards out of desperation. Our own survey back in December found that nearly 12 percent of Americans expected to have to borrow to pay for their winter heating bills.

With the downturn in home values, many Americans no longer have the ability to borrow from home equity in tough times, so it’s tempting to say that the economy may be heading over a cliff because people are borrowing just to eat and drive to work — an unsustainable situation.

But there are also indications that some of that increased credit card spending isn’t only because there’s no other option — it’s just increasingly convenient to reach for the plastic.

Papa John’s pizza chain had one such cheery announcement. On May 7, the chain proclaimed that its online pizza ordering business had surpassed the $1 billion mark in total sales, with an annualized growth rate of 50 percent. A lot of that is paid for on credit cards. And while pizza is certainly food, ordering it online via a credit card isn’t exactly a sign of desperation, or the start of a full economic meltdown. It’s just pizza.

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, we ask that you do not disclose confidential or personal information such as your bank account numbers, social security numbers, etc. Keep in mind that anything you post may be disclosed, published, transmitted or reused.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.