The Falling Credit Card Debt: Are We Wising Up?

woman drowning in credit cardsThe presence of overwhelming credit card debt is something that keeps a lot of Americans on high stress levels right now. The way this debt rises is quite alarming because of the interest rate and the charges that are imposed when consumers make a mistake with their payments. The wrong use of these plastic cards brought a lot of us on your knees when the recession hit a few years back. We all realized how wrong we were in treating credit cards as an extension of our wallets.

It seems that most of us learned our lesson about this type of debt. We now know how destructive it can get and that prompted us to make better spending choices with our charges.

Credit card balances are going down

DailyFinance.com reports that credit card debt is indeed improving. It is a far cry from the $1 trillion amount back in July of 2008. Based on the data release by the Federal Reserve, the average credit card debt in American households are now a little over $15,300. In total, the credit card debt is now down to $856 billion. That is almost $150 billion less than in 2008. This signifies one or all of these behaviors:

  • Consumers are using less of their credit cards for purchases. They are using cash in more purchases now than they did before.

  • Consumers are choosing what they buy with credit.

  • Consumers are paying their dues more responsibly. This can mean they are paying their balance in full or a significant amount of it is being paid before the due date.

  • Consumers are going through debt relief programs that help them remove the current credit card balances.

All of these paint a picture of a smarter American consumer when it comes to being in debt. They are practicing proper money management and that is always a good thing not just for their present financial situation, but also in shaping their future.

The same article on Daily Finance also credited the strict borrowing standards that discouraged consumers from getting loans. This lowered their overall debt amount and it freed funds that can now go to their credit card balances. Even when credit card companies start to loosen their standards, consumers have developed the right habits that will give them the strength to say no to the usual temptations that got them in debt before.

All of these and the rising employment rate provides consumers with the means to pay off their credit card debt. These contribute to the lowering of the debt amount in this particular type of debt.

This piece of good news enables the federal government to focus on more pressing debt problems – like student loans.

How to keep using your credit card without ending in debt

Most of us still own credit cards and some of us even got rid of the extra accounts to keep ourselves from being in too much debt again. If you think about it, credit cards are not really bad. The reason why it caused us problems is due to the fact that we did not know how to use it properly and to our advantage.

You need to learn how to maximize credit card use so you can stay away from debt – especially if you refuse to cut up your cards. Here are some tips that we have for you to help you accomplish this.

  • Use a budget. It is high time that you start living on a budget – if you haven’t done so already. This will give you an idea how much you can afford to use for your expenses. It is important not to use your credit cards unless it is indicated in the budget.

  • Do not use credit cards for everyday purchases. We all make our everyday purchases instinctively and it is best to use cash for this so we know our limits. Choose when and where you will use your cards to keep from making unnecessary purchases.

  • Know the rewards on your cards. There are cards best suited for their spending lifestyle. If you are always travelling, there is a special card for you that will help you gain rewards that you can use in your travels.

  • Pay off your balance in full before the grace period ends. The grace period refers to the time between your purchase and the due date on the billing where that transaction is stated. This will keep you from incurring interest on your balance and keep it from growing unnecessarily.

  • Save up for the rainy day. Some people keep a credit card in case of an emergency. While this is logical, it also pays to save some cash too. The Daily Finance article mentions that consumers still have a lot to learn about saving. If they can develop this habit, the chances of them being in debt will really be reduced.

Here is a video that will help you understand the benefits and risks of using credit in your life. It is important that you take care of how you use your credit to avoid any debt problems in the future. By doing so, you can take care of your credit score that will help open financial opportunities that are not possible when you have bad credit.