Racking up the credit card debt
Posted by Yankee on August 24, 2005 - 12:13pm
Last night reader mw left a link that got buried, so I'm moving it up:
Credit cards soaking up gas woes
According to this article, last year, about 54% of all gas purchases were made with credit cards. This year, it's 70%. As mw said: "Wow... that's a big jump."
- With a credit card, that $2.60 plus a gallon can easily morph into $3 a gallon if the consumer doesn't pay off all charges immediately and finance and interest charges start to accrue.
- Sales of premium and midoctane gasoline have tanked over the past few years as use of regular unleaded has risen
- The end of summer not only means fewer drivers but also less-expensive gasoline, as the specifications change to make cheaper winter grade gasoline.
Again, I send out my plea: I really want to know what will happen to the people who have massive personal debt if the economy should go bust. If you are able and willing to write up a short piece on the ramifications of high personal debt (other than how it affects one's credit rating), please let me know.
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Ten years ago, our town did not have any pay at the pump gas stations (when bigger cities like Dallas and Houston were already rolling them out)
Now, everywhere I look I can pay at the pump. Which means I don't have to stand in line inside, and I don't have to unbuckle the kids from their car seats as well. And, of course, I have to pay with plastic.
(I wonder for how much longer?)
(Tongue is in cheek here, of course.)
Sorry if I'm being dense, but what's your point? Why refer to reducing demand as "punish[ing] the market"? That's an expression I've never heard before.
What i know is lots of Britains are playing the same game of extracting cash from the housing market boom to purchase the things we 'need' and not saving anything for a rainy day.
My good wife pays off the cards on time each month :D
Where possible, I use debit cards but that's not an option at most gas stations (at the pump) and I'd be unlikely to use them if it here offered at the pump due to pin security reasons.
The risk with CCs is that people will become less elastic in their demand because now it just gets added to their monthly bill, which few people look at closely.
Also, gas stations operate on really small margins. Credit cards take 1-3% of every transaction, so this will drive up the average price ever so slightly.
There is probably something interesting in the numbers in the topic article but what... could be lower incomes increasingly resorting to credit cards for fuel purchases. When I was a poor kid I certainly avoided using my credit card unless I was desperate.
http://www.beverage-digest.com/editorial/010608.php
Pay-at-the-pump. In U.S., there were 119,751 C-stores at year-end 2000; up just +0.3% from 1999. C-store expert notes about 78% of all U.S. C-stores -- and 96% of new stores -- have gas pumps. Problem comes from fact that number of C-stores offering pay-at-the-pump increased dramatically over last five years (chart). At year-end 2000, 69% of C-stores offered pay-at-the-pump vs just 17% in 1995.
Plus, who carries enough cash to pay for 40 or 50 dollars of gas?
And I should have noted that the money comes out of the same place, my account, with either credit or debit transactions. The only difference is who pays the transaction fee.
I did use a classic credit card for gas last year, when I was a self-employed builder. I hated to do it, but I hadn't made any money yet.
From a peak oil perspective, I gave up my V8 Mustang GT a couple of years ago. I now walk, cycle or take public transport.
JN
And we have been using CC's a lot lately.
The Dutch people used to be very good at saving money, but that changed in the last decade. Now we starting to build up huge debts, just like the US.
But still it is much lower than in the US.
We use plastic to pay all the time, but usually not CC's, but direct pay from your checking or saving accounts. That way you can keep your balance easier in check. Allthough the banks start advertising agressivly on giving you debt possibilities on your saving accounts (now that is a contradictio in terminis!). Our government stated the other day that people should spend more in order to keep the economy going. The thing is, the people don't have more money to spend and are allready in debt.
As for gasoline prices, we are allready used to high prices. Now we pay around $6 for a gallon. Allthough people start to get angry, we drive like mad mans.
We have trafic congestions all over the place. You won't believe. Actually, the average speed in a automobile is nowadays equal to that when the first automobiles appeared. So much for modern cars...
So in my little corner of the fuel dispensing world I don't see a huge rise in credit card use, but it is climbing. What I do see are far less fill ups and less business.
http://www.stltoday.com/stltoday/news/stories.nsf/stlouiscitycounty/story/84B6B10D51B951538625706500 18C88B?OpenDocument
But if a guy has to get to work by car and he has no money for gas, how is he going to survive?
Young folk probably have no personal rememberance of the violence in the US during the 1973 shortages. It's starting to feel like 1973 all over again.
It is definitely raising my consciousness of how much I drive and how much gas costs, and also frees me up to buy gas at the lowest price, not at the station whose credit card I have.
In the U.S.A., I believe sometime in October of 2005 you will not be able to declare bankruptcy due to bad dept on a lot of things, credit cards is one of them. The snowball has already started in gaining momentum and not so far in the near future it is going to hit the fence and shatter. The first few that end up in court trying to work out some type of repayment or liquidation of assets to pay off their dept will suffer the most. But as the momentum continues, middle of (2006) maybe, the cases to court will start snowballing in larger and larger numbers, (you no longer can declare bankruptcy). Remember the credit card companies can not touch you until they have their day in court. (You can keep making payments, even if your behind in them, this really pisses them off). Bad credit rating, (give me a brake), who cares, you will just have to stop buying stuff at Wal-Mart.
Any way, as the system starts getting backed-up, this is when it will shatter. Millions will be just standing around wondering if their case will ever be called and the prices on everything will just keep getting higher and higher and the banks will stop lending money. This is when the economy (of the world), will go bust. Money will probably have no or little value so you better have something to trade so you can get something to eat. People that have been forced out of their homes as settlement to the banks in paying off dept, just keep a spare key and move back in, in a week or two later. Who is the Bank going to find for a buyer? They don't have someone going around seeing if the house is still empty. Remember, the whole money system is based on faith because it really has no value. If you think that the wealthy is going to have it any better, think again.
Sorry, but there is no easy answer to getting out of dept other than stop buying stuff that doesn't keep you alive. Remember, everyone in this world has been conditioned in becoming a consumer. Ask yourslef this, how much of the stuff you have really has to do with keeping you and loved ones alive?
http://www.fromthewilderness.com/free/ww3/060105_soviet_lessons.shtml
We are renting with option to buy, and I keep wondering, if things crash, am I more likely to be kicked out as a late-paying renter or a defaulting owner?
Just to give you a feel for the big picture, I'm sure when the numbers are updated for 05 they will look similar.