In the Omaha World Herald Thursday was an article about how credit card use/borrowing is falling.
Consumer borrowing fell again in July as households cut back on their credit card use for a 23rd consecutive month, adding more drag on an economy struggling to mount a sustained rebound.
Borrowing dropped at an annual rate of $3.6 billion in July, the Federal Reserve reported Wednesday. That marked the 17th drop in credit in the past 18 months.
Borrowing on credit cards fell by 6.3 percent in July after a bigger 7.5 percent June decline. This category has now fallen for a record 23 consecutive months as Americans have struggled to repair their household finances after the worst recession since the 1930s.
Households are borrowing less and saving more, and that has acted as a drag on the overall economy by lowering consumer spending, which accounts for 70 percent of total economic activity.
My reaction? Yay!
Now I’m not educated enough to know the impact that this has on the U.S. economy. I don’t know if this really means that we’re in more trouble. I don’t know how this affects the value of the dollar to the yen. But I know for individuals, this is good news.
Stats from creditcard.com:
“Average credit card debt per household with credit card debt: $16,007”
“Average total debt in 2009 (including credit cards, mortgage, home equity, student loans and more) for U.S. households with credit card debt: $54,000. (That’s down from $93,850 in 2008.)”
“Average total debt in 2009 (including credit cards, mortgage, home equity, student loans and more) for all U.S. households: $16,046. (That’s down from $35,245 in 2008.)”
-The direction is awesome. The average person then reduced their debt by $40K from 2008 to 2009. Great direction!
-If you have credit card debt, the average amount is $16,000. WOW! To pay it off, you’d have to pay $640/month for 12 years at 10% interest (a really low credit card rate).
-If you have credit card debt, you’re more likely to have other debt. I’m guessing if you’re willing to borrow from one source, you’re willing to borrow from others.
Debt is dumb.
I’ve been there. Never for a car or school loans. But, once, in a land far, far away (right after college), I had $3,000 on a credit card. I don’t know why – I was raised better. I didn’t make any big purchases, so I can only conclude that I thought I made more money than I did. There was no need for it.
Debt is a chain. All kinds of debt, not just credit card debt limits your options. Some financial peeps will tell you that college loans and mortgages are “good debt” and that credit cards are “bad debt”. Maybe schooling and housing are good reasons for debt, but the debt itself isn’t good. It limits your options. Now you have to have the job that can enable you make all those payments. You’re not free to just move from one place to another. You aren’t free to use your money however you want to. You’re obligated to the credit card company (or the mortgage company or the auto loan company).
Talk about something you regret having — debt. Banish it. Get on a plan. If you don’t make enough money to afford your life, either get a cheaper life or get more money (the legal way please).