Reading Between the Lines on News of Lower Credit Card Debt

Submitted by Jen Jones on Fri, 03/11/2011 - 2:51pm

Reading Between the Lines on News of Lower Credit Card Debt

If you’re like many average Americans, you were dealt a hefty budgetary blow during the recent Recession. And, as a result, you may have responded by trying to spend less, save more and reduce debts where you could—including cuts in your consumer credit card use.

If so, you’re not alone.

According to a recent report from Credit.com, since the inception of the economic crisis, more and more men and women are resisting the urge to spend, climbing aboard the equivalent of the “Good Ship Spendthrift” in order to create a sea of savings on a new course to a better financial future.

“After the recession, many consumers recognized the consequences of taking on more credit card debt than they could handle. This awareness may have led a number of individuals to take efforts to spend less on these accounts and drastically reduce their outstanding debts…. Consumers successfully cut their outstanding credit card debt by more than $13 billion in 2010.”

So what caused this dip in detrimental credit card spending? And what can you do to cut your card usage despite all-new post-recessionary pressures to swipe ?

Translating New, Lower Consumer Debt Numbers
While many commentators are quick to write off falling credit card debt numbers as signs that people are exhibiting personal financial responsibility in paying down debt and purchasing less, industry insiders reveal that these trends only explain a portion of the decreased consumer debt tally. Other possible causes include:

(1) A Tougher CARD Act to Follow
Some experts are actually “crediting” last year’s Credit CARD Act, with its new rules tightening the reins on how the card industry advertises to new consumers and treats its current customers, with promoting increased consumer vigilance. But these new rules often came with a cost: a rise in credit card interest rates that forced many to look to other options out of sheer debt desperation.

(2) A Lot Less Lending
Another more painful product of the financial crisis is that many banks have tightened their belts when it comes to consumer lending. These banks’ new-found austerity measures have meant that average Americans have been unable to take on added debts, even if and when they wanted to. While on its face tightening lending standards and less consumer debt may seem like a beneficial thing in a debt-laden landscape, limited lending has been shown to hurt average Americans needing access to new lines of credit for car, home or business-related purchases.

(3) Unaccounted Card Debt “Charged-Off” in Bankruptcy or Collections
Even though credit card companies, with their high fees and exorbitant interest rates, are hardly hurting in any economy, the new realities of our recent recession have meant that many have been allowed to discharge this same debt in bankruptcy.  When a customer files for bankruptcy and has credit card debt forgiven by a bankruptcy court, the creditor-credit card company generally writes off that debt as lost revenue.  As a result, these dispatched debt numbers may not appear in overall reporting of the nation’s actual credit card debt load.

Improving Your Consumer Debt Climate
For all of the above reasons, falling national consumer debt numbers may not actually reflect your actual desire to use your credit card or how much you actually owe from paying with plastic. In order to avoid a personal spending spiral, instead try to:

(1) Stick With Cash
Avoiding credit altogether assures you’ll avoid heft interest rates and fees and biting off more than you can financially chew.

(2) Avoid the Luxuries
While buying gas for your car or electricity for your home can be worthwhile expenditures in even a weakened economy, remember that eating out, purchasing pricey cappuccinos, or upgrading your home electronics system only eats away at your financial future. Head back to basics for better buying power in the process.

(3) Quit Spending, Start Saving
Avoid credit card harm and get a head start on that new or used car or home by starting to save now. Signs of increased incomes and more hiring bode well for many Americans being able add savings to their list of 2011 resolutions.

And remember, if you’re drowning in credit card debt, knowing a qualified bankruptcy attorney can help you face many of your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future beyond all of the things “in store” in 2011.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or make an appointment online at www.billsbills.com.

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