Consumers in U.S. Relying on Credit Cards as Inflation Erodes Incomes

Consumers in the U.S. are increasingly using credit cards to pay for basic necessities as income gains fail to keep pace with rising food and fuel prices. The dollar volume of purchases charged grew 10.7 percent in June from a year ago, while the number of transactions rose 6.8 percent.  Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares, who’s based in Atlanta. That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. Rising costs of food and gasoline are leaving Americans less money to spend discretionary items, worsening the recession, Tavares said. Household spending accounts for about 70 percent of the world’s largest economy.

  Bernanke’s View:

“The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, should bolster real household income, confidence, and spending,” Bernanke said.