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The mystery of credit card use

By Janna Herron ·
Wednesday, August 8, 2012
Posted: 4 pm ET

So after a spending splurge in May, Americans laid off their credit cards one month later.

Total revolving balances -- also known as credit card debt -- fell by less than a half-percent from $868.3 billion in May to $864.6 billion in June, according to latest stats released by the Federal Reserve on Tuesday.

How should we feel about that? That's the tricky thing about interpreting monthly data.

Last month, the Fed said credit card spending surged by the biggest month-over-month amount in May. Media reports and economists (and yours truly) theorized that poor job prospects, lousy consumer confidence, tepid GDP growth and the evaporation of unemployment benefits for 400,000 out-of-work Americans (my contribution to the argument) finally forced Americans to depend on credit for basic needs.

Fast forward one month and here we have a decline in credit card spending. It isn't too surprising because CreditKarma reported -- only one day after the Fed posted May's credit card stats -- the average credit card debt per household fell in June from May. Kudos to CreditKarma for being on top of it.

But now this slowdown in credit card balances is just as dire as the surge in credit card debt. One article from The Associated Press said the reluctance to charge is "further evidence that high unemployment and slow growth have made consumers more cautious about spending."

So, if we charge too much, Americans are struggling economically. If we charge less, Americans are struggling economically. Which is it?

You tell me. Why are or why are you not using your credit card?

In any case, stick to the tried-and-true strategy for credit cards: Charge only what you can pay off in full every month; send in those payments on time; keep balances below 10 percent of your credit limit; and only sign up for new credit when you really need it. Your credit score and wallet will thank me.

Follow me on Twitter: @JannaHerron

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1 Comment
August 11, 2012 at 1:50 am

Outside of a primary credit card I hold mainly for gas and a few online purchases, the only reason I open a new card is because of the discount I get at the store I'm opening it at (example: $20 back for getting a Discover Same Club Card. I just pay it off right way and don't use it further. I wonder how many other thrifty Americans like myself are doing similar to save and how it effects these reports.