Credit Card Use Jumps Regardless of Tighter Lending
Counter to what you might think in this weakened economy and the wave of tighter lending standards for almost any type of lending, including home mortgage loans, equity loans, lines of credit, credit cards, auto loans and general loans including business loans, consumers are spending more money on credit cards than you’d think. So, is this a good thing, or no?
Well, in my opnion, probably no, because this excess spending on credit cards is probably a reason why we are in the position we are in today, and if people are putting their normal expenses on credit cards, such as gas, food and necessities, then this means they are putting things on credit cards and then only making the minimum payments on them, which means they could end up paying over ten times more than what the items they originally purchased are worth when it’s all said and done unless they can consolidate and pay it all off or accelerate their payoff quicker when they have more money to work with.
The results of surveys and various other counting measures are showing that consumer credit card spending is up, with other numbers on their way down, so this is a slightly disturbing happening since many of them report also that they can only afford to make the minimum payments on the revolving debt, and this means that they are being charged anywhere from 15 to 25 percent or more on their purchases, and this is putting them further behind the eight ball, so to speak.
Some households are reporting that their monthly or biweekly income is not covering their heightened expenses, what with energy costs skyrocketing and gas prices going up higher than ever, as well as the cost of food and general cost of living going up since gasoline is used in almost every line of business for transport, and this is having a domino effect on the price of all consumer goods.
Is this finally the energy crisis that so many analysts have been saying we will eventually have? Will this force us all to purchase hybrid vehicles in the near future? Well, who knows, I wish I could see into a crystal ball.
One thing I can tell you is that using a credit card for normal every day expenses is what got me knee deep in debt in college, and took me years to finally pay off, negotiating lower rates with the credit card companies and using good, old fashioned discipline to get myself out of the strangling debt. It never felt so good! Credit cards are definitely good for many reasons, it’s just in cases where we use them to actually live on and pay expenses where we normally wouldn’t when we start to get ourselves in over our heads.