Let’s take a stroll down memory lane. I remember when I was 19-20 and I got myself into some serious credit card debt. I balance transferred and balance transferred til I ran out of balance transfers and all the credit card companies started to reject me. Lucky for me I had my father to help bail me out, but it taught me an invaluable lesson about the dangers of spending money I didn’t have and I’ve never had credit card debt since then and never plan too. We pay off our balance in full every month and we budget and tame our spending habits to ensure we will never carry a balance month to month. Credit card companies hate us, they call us “deadbeats.”
Saw this article from Bloomberg Business on how the typical American can’t help themselves from borrowing more on credit cards. I found this article both amusing and sad. It says a lot about the mindset of the “typical American” and America itself and how consumeristic we are. It also says most people are financially unhealthy.
“Through the booms, busts, and recessions of the last 15 years, U.S. credit habits have been remarkably consistent, according to a recent study from the Federal Reserve Bank of Boston. Most people carry over a balance from month to month, the study said, and they eagerly gobble up any additional credit their card-issuers offer.”
Some interesting highlights from the article:
- The typical American is always in credit card debt.
- People in their 20’s don’t save and instead begin using credit cards a lot setting themselves up for bad lifelong spending habits.
- Individuals have “very stable” credit habits over time. A person’s use of credit cards doesn’t vary much during the course of his or her life.
- Borrowing seems driven by credit limits and not how the economy is doing. If banks give a person more credit, a person will use it. If the banks decrease credit, people decrease their spending because they are forced.
I’d be interested to know how household income plays into this data. I’m not surprised at all if the bulk of the middle class (lower and middle) tend to use a lot of credit. But I’m curious about the upper middle class. Do they also constantly carry credit card debt? I’m talking about incomes that fall into the 28% and 33% tax bracket.
Anyways, as I’ve written about before, credit card debt is a marker for terrible financial health and should be avoided at all costs. It’s my belief that if you have any credit card debt you probably have a spending problem. Seek help my friend.