Consumers tax cut money to pay down credit card debt

Social Security taxes were cut in January, but the month only saw consumer spending increase 0.2 percent despite a 1 percent increase in incomes, according to a report from Bloomberg News, which cited data from the U.S. Department of Commerce. However, spending likely remained relatively unchanged because Americans put more of their money into paying down credit card debt balances instead.

"One or two percent in your paycheck is not going to change the way you live," Marshal Cohen, of the NPD Group in Port Washington, told the news agency. "It'll make living easier. What it will do is keep you spending the way you've been spending, so it will keep the status quo."

In all, consumers have concentrated on decreasing their credit card debt for the better part of the last two years. However, nationwide credit card debt balances increased only slightly in the final month of 2010 despite considerably more spending on these accounts during the holiday season.