The news on Tuesday, February 7 that U.S. consumer borrowing on credit cards rose pretty sharply in December (after a very steep rise in November) elicited some head-scratching on the part of reporters and others who were asked to come up with an instant analysis of the data.

On the one hand, spending on credit cards could mean that consumers wanted to have Christmas even if they didn’t have the ready cash to pay for it. But that thesis would seem to go against a concomitant rise in the saving rate in December by a half a percentage point.

Actually, there is a Unified Field Theory of post-crisis U.S. consumer behavior that covers all these contingencies. It starts with regarding the U.S. consumer population not as a homogeneous lump, but as a very complex group of individuals and households divisible by segments, with each segment driven by different motives and different purposes.

Even dividing U.S. consumers into two—the Credit on the Edge and the Credit Worthy segments—yields interesting results. The Credit Worthy segment is saving absolutely while the Credit on the Edge segment is saving indirectly by paying down debt. The federal government’s savings rate takes account of both, since it’s a straight subtraction problem taking spending from wages and coming up with a result. But neither kind of saving precludes spending on revolving credit cards.

When you divide, even casually, the population into more fine-grained segments, the noise in the data goes down proportionately and clarity emerges. Some consumers will have been stretched as far as they can go and had to rely on revolving credit for Christmas; others will have retreated a few steps from the edge with more interest in saving than in spending; still others will have spent at Christmas with a plan for paying it back. And while they’ll all use revolving instruments for their holiday purchases, they’re using those instruments differently.

What’s quite clear is that issuers who approach this diverse population with the notion that one size fits all will miss most of the activity—and much of the profitable activity moving forward.

Topics: Credit