It should come as no surprise that people are using their credit cards less and less.   First of all, with all of the recent bankruptcies and foreclosures, I imagine fewer people even have access to credit cards.    For those who have survived financially, many have had enough close calls that they would just prefer not to take any chances when it comes to debt.    The problem I have with that idea is that people traditionally view credit cards and debt as the same thing.    As I always preach, credit cards should be used as a method of payment, like cash or checks, but more convenient.    If you don’t even think of them as a method of finance, you won’t have a problem.

I know that this is just kind of thinking not possible for so many people.    The USA Today has an article on the reduction of credit card use.  They cite the following statistics:

Credit card usage is slowing. Revolving credit — largely made up of credit card debt — fell by nearly 20% in November, the largest drop on record, according to the Federal Reserve, reflecting less borrowing by consumers and banks’ tighter lending standards. Through October, the number of new credit card accounts was down 46% from the same period in 2008, according to Equifax.

Notice how the premise “Credit card usage is slowing.” is supported by the following statistic: “Revolving credit — largely made up of credit card debt — fell by nearly 20%”.     When I read that, I knew the author was coming from the standpoint of credit cards equals debt.    To her credit, she also cites the reduction of new credit card accounts as well.    The joke is that this statistic can be explained by the end of churning at CitiBank.

Should You Go Cold Turkey?

I won’t deny that this is the best option for people who have had problems with credit card debt.     The USA Today explores some other good reasons people are giving up credit cards.    They list the desire to simplify one’s life, the rising popularity of debit cards, and the outrage over industry practices.      As for simplification, I think their examples are better described as people who don’t want to worry about debt.     To me a debit card is more complicated as I need to worry about my balance on a day to day basis.   With a credit card, I just need to make sure I have enough money to pay off my entire balance by the due date.  I can completely relate to people who are outraged at industry practices.   In my role as consumer advocate, I hear plenty of stories about outrageous credit card practices.    If these practices make it easier for you to use other forms of payment, so be it.    I certainly wouldn’t dump credit cards as some sort of a principled stand against them.   Use the method of payment that works best for you, but don’t let your emotions get in the way.     For me, it is all about outsmarting the credit card companies by taking advantage of every legal loophole.    To that end, I rake in sign up bonus, get them to waive fees, and grab the maximum free float on larger purchases.    When I am relaxing on the beach after flying a great distance on miles earned from my reward cards, the objectionable industry practices don’t bother me as much.     Better yet, I am counting the days until February 22d, when the most egregious tricks and traps will be against the law.

Benefits Of Credit Cards

To be clear, I am not trying to tell my readers that everyone should have a wallet full of credit cards.    My role is to educate and inform, letting you make the decisions that work best for your particular situation.      The article does summarize some of the key benefits of credit cards such as purchase protection and the ability to build a credit rating.    They gloss over free float, and of course, rewards.   On the other hand, if you are thinking about getting rid of your cards because it is the only way to control your debt, the last thing that you should ever think about are credit card rewards.

Telling someone with debt that they are missing out on rewards is like telling an addict that drugs are bad, but don’t forget that they can get you high.

This entry was posted on Tuesday, February 9th, 2010 at 20:00 and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.