Americans are in a peculiar situation and “doom spending” is nowhere near to an end. According to the Federal Reserve Bank of New York, credit card debt in the US has reached a staggering $ 1.13 trillion. But that doesn’t seem to slow down American consumers from spending on impulsive purchases, particularly in travel and entertainment sectors.
This seemingly contradictory behavior can be attributed to the phenomenon of “revenge spending”, a trend where consumers indulge in pent-up desires after periods of restriction, it highlights the complex relationship between consumer behavior, economic anxieties, and the post-pandemic era’s unique spending habits.
A recent survey by Bankrate shows that, 44% of U.S. adults expect to spend more on at least one fun purchase and 38% would go into debt for at least one of these purchases. More than 27% would be willing to go into debt to travel, 14% to dine out, and 13% to attend a live entertainment event.
“The past two years, Americans unleashed a tremendous amount of post-pandemic pent-up demand for travel, dining and live events. There are mixed signals regarding whether or not that will continue this year.” – Ted Rossman, Senior Industry Analys at Bankrate.
Rossman also points out that savings have diminished and debt has increased, but there’s still a lot of demand for out-of-home entertainment. And he implies that it could be a reflection of the “you only live once” mentality that intensified during the pandemic, and some of that is because “many economic indicators are in favorable shape”.
It’s crucial to acknowledge the potential risks in the future, associated with massive credit card debt and overspending. Here’s what you should watch out for:
- High Interest Rates: credit cards notoriously carry high interest rates, which can quickly snowball and trap consumers in a cycle of debt;
- Impact on Credit Score: excessive credit card utilization can negatively impact your credit score, making it more difficult to qualify for loans and other forms of credit in the future;
- Financial Strain: overspending on credit cards can lead to financial stress and strain on your budget, making it difficult to save for emergencies or long-term goals;
- Not Saving Enough: when you overspend you tend to not look out for your savings, which can become an issue in the future.
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