Recs

11

The Daily Walk of Fame: Consumers

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

The Daily Walk of Shame series usually examines things that just aren't right in the world of finance and investing. Today, though, we're replacing the "Shame" with "Fame." Feel free to spread the love in the comments section below. 

Today's subject: New data from the Federal Reserve shows that, even as government deficits grow larger, personal deficits are shrinking. Revolving consumer debt fell at a 9.3% annualized clip in October, after declining at a rate of more than 10% in both August and September.

Visa (NYSE: V  ) , MasterCard (NYSE: MA  ) , Discover Financial (NYSE: DFS  ) , and other credit card issuers can't like this data. It means you're mostly tossing the not-so-special offers they're sending you daily.

Why you should cheer: And you've been doing this for a while now. October marks the 13th consecutive month in which credit card balances have fallen, reports CreditCards.com. You're being more frugal.

You're also shopping smarter. Gap (NYSE: GPS  ) , Abercrombie & Fitch (NYSE: ANF  ) , and Saks (NYSE: SKS  ) all reported lousy November same-store numbers, a suggestion that the traditional Black Friday shopping spree was more bleak than black.

You did that, and you should be proud.

What about the economy, you say? If there's a lesson from the Great Recession, let it be that debt-fueled growth may not be growth at all. Certainly it isn't sustainable growth when consumers run up deficits with high-rate credit cards and shaky subprime mortgages.

What now? Consumer spending is always going to be a key component of the U.S. economy. But it doesn't need to be the linchpin to growth, does it?

Alarmists will argue that a permanent spending slowdown in a more frugal society could induce a downward spiral. I don't believe that. But even if that were a possibility, is it really fair to pin America's future on a generation of consumers spending beyond their means? Haven't we already been through enough? I'd say so. That's why I applaud you, Mr. and Mrs. Cheapskate America.

Thanks to you, frugality is on its way to becoming the American virtue it's never been. Let's embrace this change and pass it on to our children. One way to get started: Join our 13th annual Foolanthropy drive, whereby the Fool will be donating time, talent, and treasure to improve financial literacy at Thurgood Marshall Academy Public Charter High School in Washington, D.C. Click here to learn more.

Or, if you're already inspired, post a comment below. For every article comment, blog post, blog comment, and discussion board post throughout the campaign, The Motley Fool will donate $0.10 to our adopted school (up to $20,000). So let us know what you think! Share your thoughts on financial literacy, volunteerism, and what you're doing in your own community, and give back at the same time.

Discover Financial is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool has a bear put spread on Abercrombie & Fitch and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is shivering. Have you seen how cold it is outside?


Read/Post Comments (13) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 09, 2009, at 2:59 PM, SteveTheInvestor wrote:

    Personally, I'm blessed with not having paid a dime in credit card interest in decades. This year, we are taking it a step further. For the first time ever, our family has agreed that we will not buy presents for each other. Nothing!

    None of us are broke. We all still have our jobs (again, blessed). We are just tired of the hype and the spend, spend, spend event that Christmas has become.

    I have noted that our local mall seems to have much less traffic this year. I have to think that other people have also chosen to spend less.

  • Report this Comment On December 09, 2009, at 3:10 PM, TMFMileHigh wrote:

    SteveTheInvestor,

    And just like, your personal tale of frugality earned $0.10 for a good cause. Wait ... another $0.10! (Grins.)

    What other stories of frugal living do Fools have to share? Let's a get a thread going.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On December 09, 2009, at 3:11 PM, catoismymotor wrote:

    "For the first time ever, our family has agreed that we will not buy presents for each other. Nothing!"

    "We are just tired of the hype and the spend, spend, spend event that Christmas has become."

    I feel the same way. I wish I could convince others in my family to suspend the gift giving. For me the materialism that surrounds Christmas puts a damper on what is a wonderful time of year.

  • Report this Comment On December 09, 2009, at 3:34 PM, pondee619 wrote:

    "Cancel Christmas! By Dayana Yochim

    December 9, 2009:... the average credit card debt increased 4% from October and has risen 14% since June."

    "The Daily Walk of Fame: Consumers By Tim Beyers

    December 9, 2009:...October marks the 13th consecutive month in which credit card balances have fallen,"

    Can we PLEASE get some consistant facts from the fool?

    Which of you are wrong/lying? If you are both right, there is something wrong with the stats. Lies, damn lies and statistics. Let's stop picking and choosing or stats to make our story, let's try to be truthful, correct and complete. I hope that is not too dificult. Are Americans being careful with their personal credit balances or not?

  • Report this Comment On December 09, 2009, at 3:51 PM, TMFMileHigh wrote:

    Hello pondee619,

    Fair point. I've not read the report that Dayana cites:

    >>According to CreditKarma.com's November U.S. Consumer Credit Score Climate Report, among those who have credit cards, the average credit card debt increased 4% from October and has risen 14% since June.

    What I do know is that the Fed measures all outstanding revolving debt, the primary source of which is credit cards. Perhaps the Fed isn't counting something that CreditKarma is?

    Either way, the trend is what matters here, and the Fed's research shows 13 consecutive months of decline in revolving debt.

    Thanks for raising the issue and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On December 09, 2009, at 4:08 PM, pondee619 wrote:

    Now i am confused. If credit balances have dropped for thirteen consecutive months ending October and has risen 4 percent since October, how can it be up 14% since June? Did it jump 10%+/- in November and if so, doesn't that shoot your consumers walk of fame argument?

    If it is the trend that matters, what is the trend, 13 straight months of declining balances or balances increasing 14% since June?

  • Report this Comment On December 09, 2009, at 5:15 PM, lewellen180 wrote:

    Average card debt increasing is not inconsistent with total outstanding revolving debt decreasing; these are really two different things. You can see why with a small example.

    Start with ten consumers, each with $100 balances on their single credit card.

    Over the next year, eight of the ten have worked hard to pay the debt down to zero and cancel their cards.

    The ninth and tenth, however, actually increased the debt on their cards to $200 by paying only the monthly minimum and continuing to use them.

    In that year, the total on-card debt fell from $1000 --> $400 (i.e. total revolving debt decreased)

    However, the average balance per card went from $100 ($1000/10) to $200 ($400 / 2) (i.e. average credit card debt increased).

    Of course, I have no idea if this is the reason why the numbers came out the way they did; but it is a way they could, based on the description given above.

    Best,

    - Lewellen

  • Report this Comment On December 09, 2009, at 5:25 PM, BMFPitt wrote:

    I'd give consumers more credit if I believed that the bulk of this decline was voluntary.

  • Report this Comment On December 09, 2009, at 5:57 PM, modestinvestor wrote:

    I've been inundated with the "Keep buying! Your economy depends on it" mantra, most of my life... and I've always been rather pleased (I daresay proud) to generally ignore it.

    When I met (and fell in love) with my soulmate, Lauren, a lovely girl whose shopping habits could support a small economy all by herself, I encountered the greatest challenge a self-taught Taoist could ask for:

    Namely-- Can a devoted, lifelong, (many credit) card-carrying, very practicing member of "American Consumer-ism", be taught to apply sensible moderation to her super-sized (a word only America could invent) shopping appetite?

    Let me first state, I do believe that consumer spending is vital to sustained economic growth, and ironic as it may seem, I'm looooong on Visa. But the national anthem of "I want... I need... I deserve... MORE!" has always struck me as more of an addiction than a lifestyle... and last March we received a much needed intervention.

    Can Americans learn to reduce their appetites for MORE, and ground themselves in an economically & ecologically sustainable idea of 'Enough'? Can we learn (again!) to produce our own quality goods, and export this quality to the rest of the world?

    I have hope.

    With Lauren, I started with coffee. When we met, she was spending $13 a day at Starbucks (2 mochas, 1 treat, plus tips). 13 x 365 = $4,745 (call it $4,500 for missed days) on coffee!

    I showed her a local coffee roaster (some towns still have them) a 1/2 mile out of her way, I bought her a french press, and offered to make her fresh coffee every morning, for a year, if she gave up Starbucks. Now we buy a pound every other Tuesday @ a local place called Pablo's (in Denver) for $10. It's the best coffee she's ever had, and she's saving $4,240 a year.

    There's nothing inherently 'evil' about Starbucks & their coffee is very decent. But the appetites/costs generated by mass brand-marketing were unsustainable & unhealthy.

    If we 'weened' ourselves partially off Chinese imports (especially toxic ones) using this same concept... Who knows how wealthy we'd be?

  • Report this Comment On December 09, 2009, at 6:00 PM, modestinvestor wrote:

    I've been inundated with the "Keep buying! Your economy depends on it" mantra, most of my life... and I've always been rather pleased (I daresay proud) to generally ignore it.

    When I met (and fell in love) with my soulmate, Lauren, a lovely girl whose shopping habits could support a small economy all by herself, I encountered the greatest challenge a self-taught Taoist could ask for:

    Namely-- Can a devoted, lifelong, (many credit) card-carrying, very practicing member of "American Consumer-ism", be taught to apply sensible moderation to her super-sized (a word only America could invent) shopping appetite?

    Let me first state, I do believe that consumer spending is vital to sustained economic growth, and ironic as it may seem, I'm looooong on Visa. But the national anthem of "I want... I need... I deserve... MORE!" has always struck me as more of an addiction than a lifestyle... and last March we received a much needed intervention.

    Can Americans learn to reduce their appetites for MORE, and ground themselves in an economically & ecologically sustainable idea of 'Enough'? Can we learn (again!) to produce our own quality goods, and export this quality to the rest of the world?

    I have hope.

    With Lauren, I started with coffee. When we met, she was spending $13 a day at Starbucks (2 mochas, 1 treat, plus tips). 13 x 365 = $4,745 (call it $4,500 for missed days) on coffee!

    I showed her a local coffee roaster (some towns still have them) a 1/2 mile out of her way, I bought her a french press, and offered to make her fresh coffee every morning, for a year, if she gave up Starbucks. Now we buy a pound every other Tuesday @ a local place called Pablo's (in Denver) for $10. It's the best coffee she's ever had, and she's saving $4,240 a year.

    There's nothing inherently 'evil' about Starbucks & their coffee is very decent. But the appetites/costs generated by mass brand-marketing were unsustainable & unhealthy.

    If we 'weened' ourselves partially off Chinese imports (especially toxic ones) using this same concept... Who knows how wealthy we'd be?

  • Report this Comment On December 09, 2009, at 7:48 PM, xetn wrote:

    Consumers: The only regulation we need. They vote with the one thing that counts, money.

    Modestinvestor: "If we weened ourselves..." are you referring to yourself or to everyone? See above, just vote with your dollars if you want to become weened.

  • Report this Comment On December 10, 2009, at 7:50 AM, pondee619 wrote:

    Lewellen:

    That only works if you "count" a zero balance credit card as no longer being in existance. They would still exist, but with a zero balance. The average would be $40 ($400/10.) Unless we are going to report a drastic reduction in outstanding cards, zero balance cards must still count toward the average. Unless, of course, you want to bend the data to fit your story.

    Credit card balances can not drop and rise during the same period. If these opposing statistics can be found/manufactured, how can a average person be expected to handicap stocks? Upon what would they base their decision? One stat contradicts the other.

    OT, It is interesting to know that I am not the only one having difficulty posting a comment on the first atttempt.

  • Report this Comment On December 11, 2009, at 4:48 AM, nivekluap wrote:

    Here's my ten cent contribution:

    Frugal; characterized by or reflecting economy in the use of resources. My deffinition; use what you have to the best of your ability.

    "Pay yourself first" -The Millionaire Next Door

    "To live a life dictated by the size of a paycheck is not really a life. Thinking that a job will make you feel secure is lying to yourself. That's cruel, and that's the trap I want you to avoid, if possible. I've seen how money runs people's lives. Don't let that happen to you. Please don't let money run your life." - Rich Dad Poor Dad

    I read the first quote almost 20 years ago and started to save for my retirement because of what I had learned. I read the second two years ago and it helped with my investing tempermant and made me more determined to buy assets, not liabilities. I've "moved up" to saving 20% of my wife's and my own gross income for retirement. (Under 100K) Of course I've learned quite a few details from the Fool along the way on how to make it appreciate at a reasonable rate of return.

    Happy investing!

    KD

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1063018, ~/Articles/ArticleHandler.aspx, 10/24/2014 4:48:03 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Tim Beyers
TMFMileHigh

Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at timbeyers.me or send email to tbeyers@fool.com. For more insights, follow Tim on Google+ and Twitter.

Today's Market

updated Moments ago Sponsored by:
DOW 16,805.41 127.51 0.76%
S&P 500 1,964.58 13.76 0.71%
NASD 4,483.72 30.92 0.69%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2014 4:03 PM
ANF $31.69 Down -1.92 -5.71%
Abercrombie & Fitc… CAPS Rating: *
DFS $62.34 Up +0.45 +0.73%
Discover Financial… CAPS Rating: ****
GPS $36.89 Down -0.25 -0.67%
Gap CAPS Rating: ***
MA $74.00 Down -0.09 -0.12%
MasterCard CAPS Rating: *****
SKS.DL2 $0.00 Down +0.00 +0.00%
Saks, Inc. CAPS Rating: *
V $213.48 Down -0.80 -0.37%
Visa CAPS Rating: ****

Advertisement