Credit card use is down and that’s a good thing

24 December 2010

What do you want first, the good news or the bad news? I guess it doesn't matter what I give to you first because the news and how you perceive it really depends on your financial condition and what you do for a living. Alright then, let me just give it to you and you can decide for yourself.

According to the Federal Reserve credit card use is down again this month and hasn't seen an increase since August of 2008. A separate survey by Javelin Strategy and Research found that 56% of people used credit cards in 2009 compared to 87% in 2007. The first aspect of good news vs. bad news may be that people are no longer spending willy-nilly on credit living lives they can't afford, now or when the payments hit. This may be because either, as some economists like the ones at Javelin say, "people are extraordinarily cautious about a double-dip recession" or they don't have the credit to play with anymore. Many people have had their available credit slashed, some by up to 90%.

Yet another reason might be that people are finally coming to their senses about credit card spending, especially the younger generation. The latest crop of consumers coming up are doing so without soil that is fed at 21% interest due to their access to technology and in turn a steady stream of up-to-date info. Sure they may have bought the newest i-gadget that will be obsolete before the battery is fully charged but they're using it to follow their spending and feel the real-time effects of those purchases plus interest. It is this constant flow of information and recent changes to credit statements that are spelling out the repercussions of their spending instantly and keeping the buying with borrowed money in check. All of this in addition to the fact that the Mac-Babies have gotten to watch their workaholic parents lose everything due to overspending and have no desire to follow suit.

We can throw all of the stones we want at the banks for being 'predatory lenders' but we signed up for the for those 'free' credit cards with amazingly low start up rates and went on a spending spree that made an episode of Wheel of Fortune in the '80s look like bargain shopping. We rolled that into credit card debt into our mortgages because we knew our homes would never lose value right? Now here we are, lessons learned. I guess in hindsight it's all pretty good news, maybe not spending money we don't have isn't such a bad thing....unless you're a bank.