While the wealthy have returned to their pre-crisis behavior of paying for everything from higher education, cars, and luxury homes with cash, the rest of the consumer sector has changed dramatically over the past six years.
The continued absence of wage growth has resulted in an unprecedented boom of non-discretionary credit. The growth in credit card balances and purchases has not been driven by higher levels of consumer confidence. Some speculate that credit card underwriting standards have been lowered in order to accelerate balance growth. Also, there may be an increasing impact of rising food and energy prices on consumers’ daily purchases on this year’s credit card balance growth. While in the very short run this will ease the financial stress of lower- and middle-income Americans, it could be worrisome over the long term.